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Chapter VIII allegedly the owner of the property by reason of the pacto de retro case at bar, do not apply

acto de retro case at bar, do not apply to judicial sales, and it was the duty of
VOLUNTARY DEALINGS WITH REGISTERED LANDS sale executed in his favor on a prior date. HELD: That, by virtue of the bidder before bidding at the auction sale to ascertain the real
the provisions of Sections 50 and 51 of Act No. 496, the pacto de rights of the judgment debtor which are to be sold.
What operates to convey or affect registered lands. retro sale in favor of B not having been recorded, filed or entered in
the Office of the Register of Deeds until C had secured his lien by After an analysis of all the above cases cited, namely,
It is the act of registration that operates to convey registered attachment, the right acquired by B under said pacto de retro shall be Worcester vs. Ocampo and Ocampo, Lanci vs. Yangco, and
land or affect title thereto. Thus, Section 50 of Act 496, as subjected to the rights of C and that being so, the right of B cannot Laxamana vs. Carlos, our Supreme Court has evolved the
amended by Section 51 of Presidential Decree No. 1529, reads as be enforced against the land until the rights of C have been fully following doctrine:
follows: satisfied.
Under the Torrens system, registration is the
SEC. 51. Conveyance and other dealings by registered However, in a subsequent similar case, namely, that of Lanci vs. operative act that gives validity to the transfer or creates a
owner. An owner of registered land may convey, mortgage, Yangco,2 our Supreme Court seems to have deviated somehow from lien upon the land (Secs. 50 and 51, Land Registration Act).
lease, charge or otherwise deal with the same in accordance the doctrine laid down in the case of Worcester vs. Ocampo and A person dealing with registered land is not required to go
with existing laws. He may use such forms of deeds, Ocampo, cited above, by adhering more to the principle of equity. behind the register to determine the condition of the
mortgages, leases or other voluntary instruments as are Thus, it was held that the purchaser at an auction sale only acquires property. He is only charged with notice of the burdens on
sufficient in law. But no deed, mortgage, lease, or other the identical interest in the property of the judgment debtor; and the the property which are noted on the face of the register or
voluntary instrument, except a will purporting to convey or circumstance that at the time of the levy of the execution and the the certificate of title. A bona fide purchaser for value of
affect registered land, shall take effect as a conveyance or consequent sale of the property the certificate shows the debtor in such property at an auction sale acquires good title as
bind the land, but shall operate only as a contract between the the execution to be the unqualified owner of the property does not against a prior transferee of the same property if such
parties and as evidence of authority to the Register of Deeds interfere with the application of this rule. It results that, where the transfer was unrecorded at the time of the auction sale. The
to make registration. judgment debtor by lawful contract alienates the property before it is existence or absence of good faith will, of course, have to
levied upon, such conveyance will be valid as against the purchaser at be determined upon the facts and the legal environment of
The act of registration shall be the operative act to the execution sale. Of course, it is not denied that in Section 50 of Act each particular case.4
convey or affect the land insofar as third persons are No. 496 it is declared that the inscription of the conveyance is the act
concerned, and in all cases under this Decree, the registration that gives validity to the transfer or creates a lien upon the land; but Such a ruling is a mere corroboration of an important
shall be made in the office of the Register of Deeds for the this is, according to the court, no obstacle to the giving of due effect principle of the Torrens system which was restated from an
province or city where the land lies. to anterior obligations, good as between the parties, and their earlier case, as follows:
successors, other than bona fide purchasers for value. One special cir-
By registration, it creates constructive notice to the whole cumstance present in the latter case, however, which was not present One of the principal features of the Torrens system of
world. Thus, Section 51 of Act 496 as amended by Section 52 of in the former one, is the fact that before the sale at public auction reg-istration is that all encumbrances on the land or special
the Decree, provides: was actually conducted, Lanci and her three daughters presented a estates therein shall be shown, or at least intimated upon
third-party claim with the sheriff, alleging that the lot belonged to the certificate of title and a person dealing with the owner
SEC. 52. Constructive notice upon registration. Every them by virtue of a transfer which was not previously registered, and of the registered land is not bound to go behind the
conveyance, mortgage, lease, lien, attachment, order, not to the defendant in the execution. It may be argued, possibly, certificate and inquire into transactions, the existence of
judgment, instrument or entry affecting registered land shall, that this fact afforded the purchaser at public auction full knowledge which is not there intimated.5
if registered, filed or entered in the office of the Register of of the existence of some prior right in the property. From the stand-
Deeds for the province or city where the land to which it point of equity, such knowledge is equivalent to registration, for we Consequently, and true to that rule, it has been held that
relates lies, be constructive notice to all persons from the time cannot, in good faith, close our eyes to realities. where there was nothing in the certificate of title to indicate any
of such registering, filing or entering. cloud or vice in the ownership of the property, or any
In another subsequent case decided, Laxamana vs. Carlos,3 it encumbrance thereon, the purchaser is not required to explore
Practical applications of the law. was held that where one purchased at a public auction the rights, farther than what the Torrens title upon its face indicates in quest
interests, and participation of a judgment debtor in the property of any hidden defect or inchoate right that may subsequently
In the case of Worcester vs. Ocampo and Ocampo, 1 the which the latter had validly sold with right of repurchase, the fact that defeat his right thereto. If the rule were otherwise, the efficacy
owner, whom we may call A, sold his property to B under pacto de the vendee in the sale with right of repurchase did not object to the and conclusiveness of the certificate of title which the Torrens
retro, but the sale was not registered. That being the case, the auction sale or file a third-party claim does not safeguard said system seeks to insure would entirely be futile and nugatory.6 In
certificate of title of A bears no notice of the sale. Subsequently, C purchaser at the auction sale from the claim of the vendee in the sale short, a purchaser in good faith of realty acquires a good title as
obtained a judgment against A, and, in the execution thereof, As with right of repurchase even if the sheriffs deed be registered in the against all the transferees thereof whose right is not recorded in
property was attached by the sheriff. The attachment was Registry of Deeds. To avoid confusion with the other cases discussed the Registry of Deeds at the time of the sale.7
registered and duly noted on the certificate of title. The property above, it may be mentioned, however, that the property involved in
was later sold at public auction and purchased by C. When C this case was not registered under the Torrens system, and that the The ruling that a purchaser of registered land need not go
attempted to register his title to the property by virtue of the provisions of Section 194 of the Revised Administrative Code, as be-yond the records to make inquiries as to the legality of the
auction sale in his favor, B opposed it on the ground that he was amended by Act No. 2837 and later by Act No. 3344, which cover the title of the registered owner, but may rely on the registry to
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determine if there is no lien or encumbrance over the same, cannot the owners or from someone of the registered owners. All interests in registration fees constitute a complete act of registration which
be availed of as against the law and the accepted principle that registered land less than an estate in fee sample are registered by operates to convey and affect the land? In answer thereto, the
rivers are parts of the public domain for public use and not capable filing with the Register of Deeds the instrument creating or transfer- Supreme Court stated, thus: In voluntary registration, such as a
of private appropriation or acquisition by prescription. 8 ring or claiming such interests, and this official makes a brief memo- sale, mortgage, lease and the like, if the owners duplicate
randum thereof upon the certificate of title, signed by him. A similar certificate be not surrendered and presented or if no payment of
But, although it is not incumbent upon a purchaser to inquire memorandum is also made on the owners duplicate. In like manner, registration fees be made within fifteen days, entry in the day
into the ownership of the registered property beyond what is stated the cancellation or extinguishment of such interests is registered. book of the deed of sale does not operate to convey and affect
on the face of the title, it still is his duty to ascertain the identity of the land sold. (Sections 55 and 56, Act No. 496.) In the case
the person with whom he is dealing as well as the legal authority of Entry in day book not sufficient accomplishment of under consideration, however, the situation is quite different, so
the latter to convey the property.9 Hence, where a purchaser dealt registration; ruling in case of Government vs. Aballe, that the Court laid down the principle that an innocent
with and bought the land from an impostor, he lacks an important abandoned. purchaser for value of registered land becomes the registered
element to constitute a purchaser in good faith whom the law owner and in the contemplation of law the holder of a certificate
contemplates to protect. In the case of Baa vs. De la Rama,13 a question was raised as to thereof the moment he presents and files a duly notarized and
whether an entry of a document in the day book of the Register of lawful deed of sale and the same is entered on the day book and
The general rule that one who buys from a person who is not Deeds may be considered sufficient to accomplish registration. This at the same time he surrenders or presents the owners duplicate
the registered owner is not a purchaser in good faith does not apply was answered in the negative. While the effect of registration certificate of title to the property sold and pays the full amount of
to a case where the seller, while he may not have been the retroacts as of the date of the entry of the document in the day book registration fees, because what remains to be done lies not
registered owner of the land at the time of the sale, acquired of the Register of Deeds, registration is not considered accomplished within his power to perform. The Register of Deeds is in duty
subsequently valid title to the land in his own name, which title was until and unless a memorandum of such document is made on the bound to perform it. We believe that is a reasonable and practical
then transferred to the vendee.10 certificate of title. This ruling abandons at least temporarily the interpretation of the law under consideration a construction
doctrine with respect to this point as laid down in the earliest case of which would lead to no inconsistency and injustice.
Doctrine in case of Lanci vs. Yangco, reversed. Government of the Philippines vs. Aballe.14
One feature worth considering in order that this new case
The case of Lanci vs. Yangco, supra, wherein equity was pre- It may be contended that Section 52 of P.D. No. 1529, which may not be confused with the previous case of Bass vs. De la
ferred to the clear provision of law, finds its parallel in a subsequent declares the effect of registration, and Section 54 of the Decree, Rama, cited in the preceding discussion, is the circumstance that
case of Buencamino, Jr. vs. Bantug. 11 In the latter case, it was held which specifies the manner of registration, are complementary to in the present case of Levin vs. Bass, the attendant facts have
that the belated registration of the transfer made does not impair each other and should be interpreted together. To hold that the mere made possible the application of another important doctrine
the validity and efficacy thereof, so long as the records show that entry of document in the day book, without noting it on the certificate which to a great extent contributed to the conclusion thus arrived
all the requisites of the law therefor have been complied with. In of title, is sufficient, would render Section 54 nugatory, and destroy at, and that doctrine is: As between two innocent persons, one
other words, an earlier sale, even if not registered in the meantime, one of the principal features of the Torrens system of registration, of whom must suffer the con-sequence of a breach of trust, the
may still prevail over a subsequent attachment although the seller requiring that all encumbrances on the land or special estates therein one who made it possible by his act of confidence must bear the
and judgment debtor remains in the records as the registered be shown or at least intimated upon the certificate of title. In that loss.16
owner be-cause the property by equity no longer belongs to said way, a person dealing with the land need not go behind the certificate
debtor. and inquire into transactions the existence of which is not there The principle laid down in Levin vs. Bass finds corroboration
The danger of such a doctrine cannot be overlooked. Thus, in intimated. and in fact is reinforced in a subsequent case entitled Potenciano
the case of Philippine National Bank vs. Camus 12 the doctrine laid vs. Dineros,17 wherein it was held that a contention that entry of
down in the two cases, namely, Lanci vs. Yangco and Buencamino, Sufficiency of registration of voluntary dealings in land. the deed in the day book is not sufficient registration must be
Jr. vs. Bantug, supra, was reversed and revoked by our Supreme rejected both upon law and upon authority. It is upon law for the
Court. It was affirmed that under Section 50 of Art No. 496 In case of sale of land, where the owners duplicate certificate of reason that Section 56 of the Land Registration Act says that
instruments ex-ecuted by the owners purporting to transfer or title has been presented with the document sought to be regis-tered, deeds relating to registered land shall, upon payment of the filing
encumber registered land shall operate only as evidence of and the registration fees paid, although the purchaser has not fee, be entered in the entry book also called day book in the
authority to the Register of Deeds to effect registration, and that it actually obtained a new certificate of title issued in his name, still same section with notation of year, month, day, hour, and
is the act of registration that shall be the operative act to convey registration may be deemed accomplished or sufficient. This may minute of their reception and that they shall be regarded as
and effect the land. constitute, in effect, an apparent tendency to return to the same registered from the time so noted. And it is upon authority,
principle laid down in the case of Government of the Philippines vs. relying upon the ruling in the same case of Levin vs. Bass above
Process of registration. Aballe, cited above. cited.

While Section 52 of P.D. No. 1529 declares from what time the To illustrate the point, reference is hereby made to the recent Presentation of title with instruments required; also when
effect of registration should be reckoned, Section 54 specifies the case of Levin vs. Bass,15 wherein the question was raised squarely, to not required.
manner of accomplishing registration. The latter provides that no wit: Do the entry in the day book of a deed of sale which was
new certificate of title shall be entered or issued upon any transfer presented and filed together with the owners duplicate certificate of For the registration of voluntary instruments, the owners
of registered land which does not divest the land in fee simple from title with the Office of the Register of Deeds and full payment of title should be presented because it is necessary not only to
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record the deed, instrument of assignment, mortgage, or lease in in the day book of the Registry, especially when an intervening right with respect to privies of the contracting parties. It is likewise
the entry book of the registry, but also to cause a memorandum consisting of an attachment shall have been presented and registered settled that the purpose of registration is to give notice to third
thereof made by the Register of Deeds on the owners duplicate during the intervening period. Actual registration retroacts as of the per-sons. In other words, as between the parties and their
certificate and its original. On the other hand, in case of involuntary date of entry in the day book only if the voluntary document sought privies, an unrecorded deed of sale covering land registered
instruments, such as an attachment, and other lien or adverse to be registered is in order or otherwise complete with the legal re- under the Torrens system passes title of ownership over the land
claim of any description, as the registration thereof is contrary to quirements when presented, inasmuch as Section 55 of Act No. 496 therein conveyed to the vendee. Failure of registration would not,
the interests of the registered owner or will affect him adversely, it (now Sec. 53, P.D. No. 1529) requires the production of the owners at anytime after the sale, vitiate or annul the right of ownership
is but natural that he will not willingly present or produce his duplicate certificate. conferred by such sale.24
duplicate certificate or at least delay its production as long as he
can. For that reason, the law does not require its presentation It cannot be overemphasized that in the registration of a volun- Elevation of doubts and controversies to Commissioner of
together with the involuntary instruments, as in the case of tary instrument the Register of Deeds will not be justified to issue any Land Registration (now Administrator of Land Registration
voluntary instruments, and considers the annotation of such new title in the name of the transferee unless the deed is Authority)
instrument upon the entry book as sufficient to affect the real accompanied with the owners duplicate certificate of title as required
estate to which it relates. 18 This again may seem to deviate from by law.21As a matter of fact, even if it be an involuntary instrument Doubtful matters of registration confronting the Registers of
the doctrine in the case of Bass vs. De la Rama cited above. for that matter, such as a judgment, when calling for the issuance of a Deeds as well as appeals from their ruling by parties in interest
new title, the Register of Deeds cannot proceed to give it immediate used to be determined and resolved by the Fourth Branch of the
The reason for the difference in requisites for registration course, unless the owners duplicate title is surrendered for Court of First Instance (now Regional Trial Court) of Manila in
between a voluntary instrument and an involuntary instrument, ac- cancellation. Meanwhile, the person claiming to be entitled thereto accordance with Section 53 of Act No. 496, as amended by
cording to the Supreme Court in the Villasor case, aforecited, is shall apply by petition to the court which, after hearing, may order Section 200 of the Revised Administrative Code.
that the registered owner or any person withholding the title to surrender
the same, and direct the entry of a new certificate upon such The aforementioned provision of law, however, was
the law requires the production of the owners duplicate surrender.22 superseded by Republic Act No. 1151 creating the Land
certificate by the registrant for a voluntary instrument to be Registration Commission (now The Land Registration Authority),
registered, because as a voluntary instrument is a wilful act of the Effect of failure to register. which provides in its Section 4 as follows: When the Register of
registered owner of the land to be affected by the registration, it is deeds is in doubt with regard to the proper step to be taken or
to be presumed that he is interested in registering the instrument, From the standpoint of third parties, it is a positive rule that a memorandum to be made in pursu-ance of any deed, mortgage,
and would willingly surrender, present or produce his duplicate property registered under the Torrens system remains, for all legal or other instrument presented to him for registration, or where
certificate of title to the office of the Register of Deeds in order to purposes, the property of the person in whose name it is registered or any party in interest does not agree with the Register of Deeds
accomplish such registration. Thus, it was rightly held that in inscribed, notwithstanding the execution of any deed of convey-ance with reference to any such matter, the question shall be
voluntary registration, the presen-tation of the deed of sale and its or encumbrance, unless the corresponding deed is inscribed or submitted to the Commissioner of Land Registration either upon
entry in the day book without the surrender of the title did not registered. If registered, it acquires validity as a conveyance or lien the certification of the Register of Deeds, stating the question
operate or convey and affect the land sold or conveyed. 19 from the time of registration; and, as the law states that unless such upon which he is in doubt, or upon the suggestion in writing by
act is performed said deed does not serve as a deed of conveyance the party in interest; and thereupon the Commissioner, after
Following the above pattern, in a case where a deed of sale and cannot bind the property, it follows that until then the registered considera-tion of the matter shown by the records certified to
not accompanied with the owners duplicate certificate of title was right of the owner subsists.23 him, and in case of registered lands, after notice to the parties
presented for registration and entered in the day book of the and hearing, shall enter an order prescribing the step to be taken
Registry of Deeds on May 10, 1951, and subsequently on August 4, While it is true that the act of registration of a deed of sale of or memorandum to be made.
1951, an at-tachment was presented and registered involving the land is the operative act to convey and affect the land sold, because
same property, although the deed of sale presented earlier was the deed serves only as evidence of authority to the Register of To pursue an appeal by consulta from the Register of Deeds
finally registered on September 22, 1951, the owners duplicate Deeds to make registration (Sec. 51. P.D. No. 1529), the purchaser to the Commissioner of Land Registration, the party in interest is
certificate of title having been surrendered then, the new certificate does not necessarily lose his rights by his mere failure to register until al-lowed a period of the five days from receipt of notice of the
of title issued to the pur-chaser had to carry over the attachment after a third party who has acquired the land in good faith and for denial of registration, provided the documents involved have not
lien. The attachment which was registered on August 4, 1951, value shall have registered the subsequent deed. However, the been with-drawn from the Registry and the prescribed consulta
acquired precedence over the right of the purchaser inasmuch as purchaser who knows or ought to know that the land he is acquiring fee paid, in accordance with the provision of Section 117 of
such right of the latter became effective only on September 22, has previous]y been sold, but which sale has not been registered, is Presidential Decree No. 1529.
1951, when the owners duplicate certificate of title was actually not a purchaser in good faith and for that reason his acquisition
presented and the registration of the sale given due course. 20 In cannot defeat the right of the first purchaser on the mere ground that In view of the aforementioned clear provision of law
other words, where the owners duplicate certificate of title failed to the second deed has been registered. creating the Land Registration Commission, it is seriously
accompany the document involving a voluntary transac-tion, such doubted whether a party in interest who does not agree with the
as, a deed of sale, presented for registration, the subsequent It is a well-settled rule that registration is not necessary to make ruling of the Register of Deeds may directly resort to the courts
registration thereof when the owners duplicate certificate of title is a contract of sale valid and effective as between the parties thereto. to mandamus this official to compel him to register a particular
surrendered later will not retroact as of the date of its original entry For, actual notice is equivalent to registration. This principle holds true document. Even assuming that the remedy of appeal to the
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Commissioner of Land Registration as provided in the law partakes following the procedure prescribed in Rule 45 of the Rules of Court, In passing upon the registrability of documents sought to be
of the nature of an administrative proceeding, still it would seem but only ques-tions of law may be raised in the petition and must be registered, the Register of Deeds is charged with the power to
that the party in interest cannot by-pass the Commissioner in such distinctly set forth. deter-mine under his responsibility whether the formal requisites
matters. To permit such a recourse would be deviating from the of the law have been complied with. Incidentally, Section 55 of
doctrine of exhaustion of administrative remedies, which is so well- Register of Deeds not authorized to determine whether or not Presidential Decree No. 1529, requires that every deed or other
settled in this jurisdiction. It requires that where an administrative fraud was committed in the deed sought to be registered. voluntary instru-ment presented for registration shall contain or
remedy is provided by statute, relief must be sought by exhausting have endorsed upon it the full name, nationality, place of
this remedy before the courts will act. This doctrine is said to rest The duties enjoined upon the Register of Deeds by Section 57 of residence, post office address of the grantee or other person
upon the presumption that the administra-tive agency, if given a the Land Registration Act are clearly ministerial and mandatory in acquiring or claiming an interest under such instrument, and
complete chance to pass upon the matter, will decide correctly.25 character, not only as indicated by the auxiliary shall but by the every such instrument shall also state whether the grantee is
nature of such functions required to be performed by him. Upon the married or unmarried, and, if married, the full name of the
Appeal from decision of Land Registration Commission (now other hand Section 193 of the Administrative Code, in referring to the husband or wife. If the grantee is a corporation or association,
the Land Registration Authority) general functions of register of deeds, provides that it is the duty of the deed must show that such corporation or association has the
a register of deeds to record in proper form all instruments relative to re-quirements prescribed by existing law for acquiring public
Under the provision of Section 4 of Republic Act 1151, when a such land, the recording whereof shall be required or al-lowed by land, in case the land sold or conveyed was originally public land.
party in interest disagrees with the ruling or resolution of the Com- law. If the Register of Deeds is in doubt as to the propriety of This latter requirement may be expressed in the deed by means
missioner of Land Registration and the issue involves a question of recording any given instrument, Section 4 of Republic Act No. 1151 of a statement to the effect that such corporation or association
law, appeal could be taken therefrom directly to the Supreme provides the procedure to be followed. The question of whether or not has at least sixty (60) percent of its capital belonging to Filipinos.
Court. However, said provision of law has been amended by the conveyance was made to defraud creditors of the transferor
Republic Act 5434, approved September 9, 1968, and under the should better be left for determination by the proper court. There is The registration with the Registry of Deeds of voluntary
amendatory law the party aggrieved by a final ruling, order or as much danger in giving this authority to the Register of Deeds convey-ances of real property under the Torrens system is mainly
decision of the Land Registration Commission may appeal without judicial intervention as there would be injustice in the sug- controlled by the Land Registration Act, as amended. Among
therefrom to the Court of Ap-peals, instead of the Supreme Court, gested frustration of a judicial victory for a party to the case. 27 others, this statute provides that the act of registration is the
within fifteen days after notice, regardless of whether the appeal operative act to convey and affect registered land. The
involves questions of fact, mixed questions of fact and law, or Invalidity of contract not valid objection to registration. requirements for deeds and other voluntary instruments of
questions of law, or all the three kinds of questions. conveyance to be registrable thereunder are specified in the law,
No valid objection can be interposed to the registration of a thus: (1) The presentation of the owners dupli-cate certificate
The procedure prescribes that the appellant shall file a notice document by the Register of Deeds who finds nothing defective or whenever any duly executed voluntary instrument is filed for
of appeal with the Court of Appeals and with the Land Registration irregular on its face upon an examination thereof. Thus, it was held registration; (2) the payment of the prescribed registration fees
Commission that made or rendered the ruling or decision appealed that the law on registration does not require that only valid instru- and the requisite documentary stamps; (3) the evidence of full
from, serving a copy thereof on all other interested parties. Such ments shall be registered. How can parties affected thereby be sup- payment of real estate tax as may be due; and (4) the inclusion
notice of appeal shall state, under oath, the material dates to show posed to know their invalidity before they become aware, actually or of one extra copy of any document of transfer or alienation of
that it was filed within the period fixed by law. Thereupon, the ap- constructively, of their existence or of their provisions? If the purpose real property, to be furnished the city or provincial assessor.
pellant shall pay to the Clerk of the Court of Appeals the docketing of registration is merely to give notice, then questions regarding the Upon satisfaction of such minimum requirements set by the
fee fixed in the Rules of Court, and deposit the sum of P300.00 for effect or invalidity of instruments are expected to be decided after, existing statutes, it becomes the duty of the Register of Deeds to
cost, and failure to effect such payment and deposit within the not before, registration. It must follow as a necessary consequence give course to registration.
period fixed shall be a ground to dismiss the appeal. that registration must first be allowed, and validity or effect litigated
afterwards.28 No entity, except the legislature itself, may add to or detract
The brief of the appellant shall be served and filed within from or otherwise alter or amend the requirements it has so
thirty days from the date he is notified that the record has been However, according to the same case laying down the above enumer-ated and then only by the corresponding amendment
received by the Court of Appeals, and shall contain, as an rule, the procedure indicated must not be understood to be an of the existing statutes or the enactment of new ones. The local
appendix, the ruling or decision appealed from; while the appellees absolute and invariable rule, for parties may, by mutual consent, government cannot impose additional requirements; and for a
brief should be filed within thirty days from receipt of the submit issues for determination at the time of the proceeding to chartered city to add new requirements for registration not
appellants brief; and the ap-pellants reply brief, within fifteen days register a document. In that event the court should only proceed with otherwise provided by statutory law in the matter is tantamount
from receipt of the appellees brief. The Court of Appeals, for good the determination of such issues upon giving all the parties concerned to amending or modifying the law, a power which is not vested in
cause, may extend the periods, but the total extension granted sufficient oppor-tunity to present their respective sides and the such a chartered city.29
shall not, except in meritorious cases, be greater than the original evidence in support thereof, and if this cannot be done, the
period fixed. determination of the issues should be reserved in a subsequent Sale of lands to aliens.
proceeding and the registration of the document ordered.
From the final judgment or decision of the Court of Appeals, On the legal question of whether an alien may, under the
the aggrieved party may further appeal by certiorari to the Formal details required of voluntary instruments. Constitution, acquire private urban lands in the Philippines, the
Supreme Court as provided by Section 1 of Republic Act 5434, Su-preme Court in the celebrated case of Krivenko vs. Register
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of Deeds of Manila30 held that aliens are not allowed to acquire prescribed by the Assessment Law. Such right is but an incident of in the Philippines; the date he lost his citizenship and the country
ownership of urban or residential lands in the Philippines, and as a the right of ownership and its exercise by the owner, who happens to of which he is presently a citizen; and such other information as
consequence, all acquisitions made in contravention of the be an alien, does not fall within the purview of the terms shall be may be required by pertinent rules and regulations issued by the
prohibition since the fundamental law became effective are null and transferred or assigned used in Section 5, Article XIII of the Secretary of Justice.
void per se and ab initio. Constitution, or of the terms encumbered, alienated or transferred
used in the implement-ing provisions of Section 122 of the Public Transfer of private land to natural-born citizen of the
The ruling is based mainly on the ground that private urban or Land Act.36 Philippines who has lost his Philippine citizenship.
residential lands fall under the category of agricultural land and to
them the following constitutional provision squarely applies: Alien acquisition subject to public policy. Under Sections 2 and 3 of B.P. Blg. 185, which took effect
on March 16, 1982, the law allows aliens to acquire land in the
Save in cases of hereditary succession, no private lands As the Constitution is silent as to the effects or consequences of Philip-pines. The law provides:
shall be transferred or conveyed except to individuals, a sale by a Filipino citizen to an alien, and as both the citizen and the
corpora-tions, or associations qualified to acquire or hold lands alien have violated the law, none of them should have a recourse Sec. 2. Any natural-born citizen of the Philippines who
of the public domain.31 against the other, and it should only be the State that should be al- has lost his Philippine citizenship and who has the legal
lowed to intervene and determine what is to be done with the prop- capacity to enter into a contract under Philippine laws may
Upon the above premise, the refusal of the Register of Deeds erty subject of the violation. What the State should do or could do in be a transferee of a private land up to a minimum area of
of Manila to register the sale of private residential land to an alien such cases is a matter of public policy, entirely beyond the scope of one thousand square meters, in the case of urban land, or
was upheld by the Court. judicial authority.37 While the legislature has not definitely decided one hectare in the case of rural land, to be used by him as
what policy should be followed in such cases of violations against the his residence. In the case of married couples, one of them
However, in the subsequent case of Trinidad Gonzaga de constitutional prohibition, courts of justice cannot go beyond declaring may avail of the privilege herein granted; Provided, that if
Cabauatan, et al. vs. Uy Hoa, et al., 32 it was held that the the disposition to be null and void as violative of the Constitution. 38 both shall avail of the same, the total area acquired shall
Constitution was not in force during the Japanese military not exceed the maximum herein fixed.
occupation and there-fore the constitutional provision disqualifying However, the rule that where both parties are in pari delicto
aliens from acquiring real property in the Philippines was not there should be no action by one against the other, has been inter- The case of transferee already owns urban or rural
applicable and the doctrine laid down in the Krivenko case cannot preted as applicable only where the fault on both sides is more or less lands for residential purposes, he shall still be entitled to be
be invoked in a sale that took place during said occupation. The equivalent; it does not apply where one party is literate or intelligent a trans-feree of additional urban or rural land for residential
principle laid down in this decision was followed in the case of while the other one is not. 39 Neither does it apply to a situation con- purpose which, when added to those already owned by him,
Ricamara vs. Ngo Ki, promulgated April 29, 1953, and again in the templated by Article 1416 of the Civil Code providing as an exception shall not exceed the maximum areas herein authorized.
case of Bautista vs. Uy Isabelo, promul-gated September 29, to the rule in pari delicto that where an agreement is not illegal per
1953.34 se but is merely prohibited, and the prohibition by law is designed for Sec. 3. A transferee under this Act may acquire not
the protection of the plaintiff, he may, if public policy is thereby more than two lots which should be situated in different
On the other hand, it is to be considered that during the Japa- enhanced, recover what he has paid or delivered.40 municipali-ties or cities anywhere in the Philippines:
nese occupation the existing Republic of the Philippines adopted on Provided, that the total area thereof shall not exceed one
September 4, 1943, a constitution of its own containing Incidentally, by virtue of an amendment to the Constitution, a thousand square meters in the case of urban lands or one
substantially the same prohibition against acquisition of lands by natural-born Filipino citizen who has lost his citizenship may now hectare in the case of rural land for use by him as his
aliens. But this cannot be applied to a sale of land executed on acquire by purchase or transfer private land for use by him as resi- residence. A transferee who has already acquired urban
March 30, 1943, or prior to September 4, 1943. Neither are the dence. Batas Pambansa Blg. 185 grants such person, or the couple if land shall be disqualified from acquiring rural land, and vice
provisions of our present Constitution applicable to said sale for the married, the right to so acquire private urban land up to 1,000 square versa.
simple reason that such instrument was not in force during the meters or rural land up to one hectare for residential purposes:
enemy occupation.35 Of course, it is to be borne in mind that not all The transfer as a mode of acquisition in said law refers to
sales of lands to aliens during the Japanese occupation are Provided, however, that where the transferee already owns urban or ei-ther voluntary sale, devise or donation, or involuntary sales on
necessarily valid; the exact date of the perfection of the contract is rural land for residential purposes, the total area of his landholdings tax delinquency, foreclosure and execution of judgment.
to be considered for the purpose of such determination. Such sales shall not exceed the above maximum area; provided, further, that the
on or after September 4, 1943 are void. But where the sale has transferee may acquire not more than two lots which should be situ- Under the law, for the purpose of registering such transfer
been so declared null and void for being in violation of the ated in different municipalities or cities; and provided, furthermore, the transferee shall, in addition to the other requirements for
Constitution, the vendor is precluded from maintain-ing an action that the transferee who has already acquired urban land shall be registration of title under P.D. No. 1529, submit to the Register of
for recovery of the property, under the principle of pari delicto. disqualified from acquiring rural land, or vice versa. Deeds where the subject property is located a sworn statement
showing the date and place of his birth; the names and
Right to repurchase is not contemplated by the constitutional For the registration of title to such land thus acquired, an affi- addresses of his parents, of his spouse and children, if any; the
prohibition. Thus, an alien who validly owns agricultural land, which davit is required to be submitted to the Register of Deeds showing the area, the location and the mode of acquisition of his landholdings
has been sold at public auction for tax delinquency, may avail date and place of his birth; the names and addresses of his parents, in the Philippines; the date he lost his Philippine citizenship and
himself of the right to repurchase the same within the period of his spouse and children, if any; his intention to reside permanently the country of which he is presently a citizen; and such other
5
information as may be required in the im-plementing rules and private persons. Thus, the validity of such titles is left open to further Constitution. The evil sought to be avoided by the constitutional
regulations. dispo-sition by the Government. inhibition, as recently construed by the Supreme Court, is to
prevent any portion of our lands, including residential lots, from
Aforequoted Sections 2 and 3 of B.P. Blg. 185 have been In justice, however, to American oldtimers, and those who were falling into the hands of aliens. Such an eventuality is not present
amended by a new section designated as Section 10 of the Foreign former Filipino citizens, and Americans who have become perma-nent here, because the registra-tion, it has already been said, is
Investments Act (R.A. No. 7042) pursuant to Section 5 of R.A. residents of the Philippines, Presidential Decree No. 713 was issued sought not to vest title in an alien but simply to enable an entity
8179, approved on March 28, 1996. Said law reads as follows: on May 27,1975, granting them special treatment. Accord-ingly, qualified to hold the land to perfect its title.
citizens of the United States who were formerly citizens of the
Sec. 10. Other rights of Natural Born Citizen Pursuant to Philippines or who on May 27, 1976 had resided in the Philippines Consistent with the above principle, where land was sold to
the Provisions of Article XII, Section 8 of the Constitution. continuously for at least twenty years, and who in good faith had a Chinese citizen, but later on the same property was acquired
acquired private residential lands in the Philippines not exceeding by a Filipino citizen, who obtained a new transfer certificate of
Any natural-born citizen who has lost his Philippine citizen- 5,000 square meters for a family dwelling before July 3, 1974, are title therefor, it was held that the validity of the titles thus
ship and who has the legal capacity to enter into a contract allowed to continue to hold such lands indefinitely and to transfer obtained can no longer be questioned after the lapse of the
under Philippine laws may be a transferee of a private land up ownership thereof to qualified persons or entities. The same right is period within which it may be impugned.42
to a maximum area of five thousand (5,000) square meters in granted to those citizens of the United States who have become
the case of urban land or three (3) hectares in the case of permanent residents of the Philippines and who acquired private Effect of naturalization of alien buyer.
rural land to be used by him for business or other purposes. residential lands of not more than 5,000 square meters for a family
In the case of married couples, one of them may avail of the dwelling. In a sale of private agricultural land to an alien disqualified
privilege herein granted: Provided, that if both shall avail of to hold title thereto, the vendor divests himself of the title to
the same, the total area acquired shall not exceed the With respect to American landholdings not covered by the above such land and is not permitted to sue for the annulment of the
maximum herein fixed. special concession, Presidential Decree No. 668 issued March 7, 1975, sale. The alien buyer holds such title against the whole world,
has authorized the National Development Company, a government- except against the State. But where the State has not
In case the transferee already owns urban or rural land for owned corporation, to acquire, hold, develop and dispose all lands commenced escheat proceedings and in the meantime the alien
busi-ness or other purposes, he shall still be entitled to be a acquired by Americans under the Parity Amendment before the has become a naturalized citizen of the Philippines, the State
transferee of additional urban or rural land for business or other termination on July 3, 1974 of their right to acquire such lands. shall be deemed to have waived its right to escheat the property
purposes which when added to those already owned by him shall and the title of the alien thereto becomes lawful and valid as of
not exceed the maximum areas herein authorized. However, with respect to lands acquired by Americans prior to the date of its acquisition or transfer to him. For if the aim of the
July 4, 1946, such acquisition has been held as vested rights and as ban on alien from acquiring land is to preserve such and for
A transferee under this Act may acquire not more than two (2) such cannot be impaired.41 future generations of Filipinos, that aim would not be thwarted by
lots which should be situated in different municipalities or cities making lawful such acquisition of an alien who has now become a
any-where in the Philippines: Provided, that the total land area Simultaneous registration of sales coursed thru alien buyer Filipino by naturalization.43
thereof shall not exceed five thousand (5,000) square meters in the allowed.
case of urban land or three (3) hectares in the case of rural land for But where an applicant for naturalization entered, within the
use by him for business or other purposes. A transferee who has Unless the court should hold otherwise, it seems that where an two-year period prescribed by Republic Act No. 530, into an
already acquired urban land shall be disqualified from acquiring alien acquired residential land by purchase but before the sale is agree-ment to purchase a parcel of land payable in installments
rural land and vice versa. registered in his name he has already disposed of the land to one for ten years and consented to the placing of his citizenship in
legally qualified, the simultaneous registration of the two successive the document as Filipino, he violated the government-
The law refers to former citizens of the Philippines who were sales may favorably be acted upon, according to an opinion of the announced policy in the Constitution against acquisition by aliens
natural born. If they were naturalized and lost Philippine Secretary of Justice rendered on January 24, 1948, in connection with of private agricultural land since he has no right to presume his
citizenship, they are not qualified to acquire lands under the a case involving a sale in favor of a Japanese national and the admission to Philippine citizenship upon the expiration of the
aforequoted laws. This is so because of the public policy that land property subsequently passing by virtue of a vesting order from the prescribed period.44
in the Philippines is reserved for the Filipinos. Philippine Alien Property Administration of the United States with one
Cenen Francisco as the last transferee. The principle underlying the False narration of facts in a deed of sale of real property
American landholdings. ruling may be restated as follows: It may be true that an alien, may constitute falsification of public document. It was thus held
except an American, may not now acquire residential lots in this that an alien woman has the legal obligation to disclose her true
Under the provision of Section 11, Art. XVII, of the 1973 Con- jurisdiction, and that he may not therefore register the sale of such citizenship in a contract of sale of real property where the
stitution of the Republic of the Philippines, the rights and privileges lots in his favor, but this is so only if the purpose of the registration is disclosure of the truth would have rendered the sale a patent
granted to citizens of the United States and to corporations or as- to make him the owner of the land. Where such registration would nullity as violative of the Constitution prohibiting aliens from
sociations owned or controlled by such citizens under the Ordinance serve only as a means to complete and perfect the title of a person or acquiring private agricultural lands, and such act of false
appended to the 1935 Constitution automatically terminated on entity not otherwise disqualified to acquire the land, the registration disclosure therein does not cease to be an offense punishable
July 3, 1974; and titles to private lands acquired by such persons of such a deed would not, in the opinion of the undersigned under the Revised Penal Code, by the subsequent naturalization
before July 3, 1974 were declared valid but only as against other (Secretary of Justice), contravene any provision of law or of the of her husband.45
6
restricted to the ownership and control of not to exceed 1,024 amended) is converted to private property by the mere
It may not be amiss to state here that an alien woman hectares of land. lapse or completion of said period, ipso jure.
married to a Filipino native-born or naturalized becomes ipso facto
a Filipina provided she is not disqualified to be a citizen of the Be it noted that the defect in filing the confirmation proceedings Since Section 48(b) of the Public Land Act itself con-siders
Philippines under Section 4 of Commonwealth Act 473. It is in the name of a corporation was simply an accidental circumstances, possession of public land which is of the character and
required, however, the she file a petition with the Bureau of in no wise affecting the substance and merits of the right of duration prescribed by statute as the equivalent of an
Immigration for the cancellation of her alien certificate of ownership sought to be confirmed in said proceedings. 49 express grant from the State, then confirmation
registration alleging, among other things, that she is married to a proceedings would in truth be little more than a formality,
Filipino citizen and that she is not disqualified from acquiring her Private corporations or associations as applicants. at the most limited to ascertaining whether the possession
husbands citizenship pursuant to Section 4 of the same Act, as claimed is of the required character and length of time; and
amended. Upon filing of said petition, which should be accompanied The Philippine Constitution of 1973, Article XIV, Section 11, registration thereunder would not confer title, but simply
or supported by the joint affidavit of the petitioner and her Filipino provides that no private corporation or association may hold alien- recognize a title already vested. The proceedings would not
husband to the effect that the petitioner does not belong to any of able lands of the public domain except by lease not to exceed one originally convert the land from public to private land, but
the groups disqualified by the above cited section from becoming thousand hectares in area. There is a similar provision in the 1987 only confirm such a conversion already ef-fected by
naturalized Filipino citizen, the Bureau of Immigra-tion conducts an Philippine Constitution, Article XII, Section 3, which provides that operation of law from the moment the required period of
investigation and thereafter promulgates its order or decision private corporations or associations may not hold such alienable possession became complete.
granting or denying the petition.46 lands of the public domain except by lease, for a period not exceeding
twenty-five years, renewable for not more than twenty-five years, The purely accidental circumstances that confirma-tion were
Acquisition of land with money furnished by alien, when and not to exceed one thousand hectares in area. It is clear that if brought under the aegis of the 1973 Constitution which
valid. the land is still part of the alienable and disposable lands of the public forbids corporations from owning lands of the public domain
domain at the time a corporation or association files an application for cannot defeat a right already vested before that law came
There is no question that under the Constitution an alien can- confirmation of imperfect or incomplete title thereto or at the time into effect, or invalidate transactions then perfectly valid
not acquire by purchase lands in the Philippines, and what an alien such applicant acquired the land from a Filipino citizen, then the and proper. The Constitution cannot impair vested rights.
cannot do directly he cannot be permitted to do indirectly. However, aforequoted constitutional bar applies.
in an actual case decided by the Court of Appeals, it was held that The object that ACME, as juridical person, is not qualified to
acquisition by a citizen of the Philippines of private agricultural The prohibitions in the said Constitutions against a private apply for judicial confirmation of title under Sec-tion 48 (b)
lands with money given or donated to him by an alien, provided the corporation (or association) acquiring lands of the public domain, do of the Public Land Act, is technical, rather than
trans-action was done in good faith, is valid. 47 It is explained that not apply where at the time such corporation acquired the land, its substantial.
what is prohibited by the Constitution and the statutes is the predecessors-in-interest by exclusive, continuous, and adverse pos-
acquisition of private agricultural lands by an alien for himself. session of the same for more than 30 years had acquired ownership The ruling in Manila Electric C0. vs. Castro-Bar-tolome, 114
thereof ipso jure, enabling the latter to convey title to the SCRA 799 that a private corporation is not qualified to apply
Registration of alien corporation not a prerequisite to corporation. (Republic vs. CA, 155 SCRA 708). for such registration under said provision of the Public Land
owning real property. Act is no longer deemed to be binding.
The case of Director of Lands vs. IAC and ACME, 146 SCRA 509,
Where an alien corporation may validly acquire lands in the made significant and precedent-setting ruling on the matter, as The current doctrine, first enunciated in the Meralco case
Philippines, it is not necessary as a prerequisite that it be registered follows: (146 SCRA 509) that the constitutional prohibitions in the 1973
and authorized to transact business here. Thus, in a case where an and 1987 Constitutions do not apply to public lands already
at-tempt was made to invalidate a sale on the theory that the Notwithstanding the prohibition in the 1973 and 1987 Constitutions converted into private ownership by natural person under the
Hakodate Dock Co., Ltd., a purely Japanese concern, was never against private corporations holding lands of the public domain provisions of the Public Land Act, was subsequently reiterated in
registered as such in the Philippines, nor was it authorized to except by lease not exceeding 1,000 hectares, still a private Director of Lands vs. Manila Electric Co., 153 SCRA 686 and other
transact business in accordance with existing Philippine Corporation corporation may institute confirmation proceedings under cases. (Republic vs. CA, 156 SCRA 344; De Ocsio vs. CA, 170
Law, the Supreme Court thwarted the attempt by stating: What is Section 48(b) of the Public Land Act if, at the time of in-stitution SCRA 729; Director of Lands vs. Iglesia ni Cristo, 200 SCRA
more, we know of no law or provision of the Corporation Law which of the registration proceedings, the land was already private 606). In Natividad vs. CA, 202 SCRA 439, the Supreme Court
prohibits a business concern not authorized to transact business land. On the other hand, if the land was still part of the public said that determinative of this issue is the character of the
from buying or owning real property.48 domain, then a private corporation cannot institute such parcels of land whether they were still public land or already
proceedings. private when the registration proceedings were commenced. If
In this connection, however, it may be stated that under Re- they were already private lands, the constitutional prohibition
public Act 5167, no corporations shall be authorized to conduct the The correct rule x x x is that alienable public land held by a against acquisitions by a private corporation would not apply.
business of buying and selling public lands or be permitted to hold possessor, personally or through his predecessors-in-interest,
or own real estate except such as may be reasonably necessary to openly, continuously and exclusively for the pre-scribed Alien religious corporation disqualified.
enable it to carry out the purposes for which it is created, and statutory period (30 years under the Public Land Act, as
every corporation authorized to engage in agriculture shall be
7
The provisions of Act No. 271 of the Philippine Commission Notices and processes in relation to registered land are mailed to preclude the registered owner, however, in cases of registration
which allow all religious associations, of whatever sect or the addresses of persons shown in the records. To keep this infor- procured by fraud, to pursue all his legal and equitable remedies
denomina-tion, whether incorporated in the Philippines or in other mation up-to-date, Section 55 of the Property Registration Decree against the parties to such fraud, without prejudice to the rights
country, to hold land in the Philippines for religious purposes, are requires that any change in the residence or post office address of of any innocent holder for value of a certificate of title.
deemed repealed by the absolute terms of Article XIII, Section 5, of such person shall be endorsed by the Register of Deeds on the origi-
the (1935) Constitution, which limit the acquisition of land in the nal instrument, on receiving a sworn statement of such change. All Registration procured by means of a forged duplicate
Philippines to its citizens, or to corporations or associations at least names and addresses are also entered upon all certificates of title. certificate or of a forged deed or other instrument is null and
sixty per cen-tum of the capital of which is owned by such citizens, Notices and processes in relation to registered land in pursuance of void. The law requires that in case of the loss or theft of an
adopted after the enactment of said Act No. 271. Thus, it was held the said Decree may be served upon any person in interest by mailing owners duplicate cer-tificate, notice thereof need be sent to the
that a deed of donation of a parcel of land executed by a Filipino the same to the address shown in the records, and shall be binding Register of Deeds as soon as the loss or theft is discovered.
citizen in favor of a religious organization whose founder, trustees whether such person resides within or without the Philippines. The
and administrator are non-Filipinos, cannot be admitted for court, however, may in its discretion require further or other notice to Issuance of transfer certificate of title to purchaser
registration. And the refusal of the Register of Deeds to register be given in any case, if in its opinion the interests of justice so essential.
such deed is not violative of the freedom of religion clause of the require.
(1935) Constitution (Section 1 [7], Article III), since land tenure is The entry of a memorandum of a conveyance in fee simple
by no means indispensable to the free exercise and enjoyment of Owners duplicate title as safeguard against fraud. upon the original certificate of title without the issuance of a
religious profession or worship; or that one may not worship God transfer certificate of title to the purchaser is not a sufficient
according to the dictates of his conscience unless upon land held in As a safeguard against fraud, Section 55 of Act No. 496, as registration of such conveyance. The issuance of title is one of
fee simple.50 amended by Section 53 of P.D. No. 1529, forbids the Register of the essential features of a conveyance in fee simple by
Deeds from entering any new certificate of title or making any registration, and, in order to enjoy the full protection of the
Corporation sole as mere administrator of church property memorandum upon any certificate, in pursuance of any deed or other system, the purchaser must be a holder in good faith of such
not contemplated in constitutional prohibition. voluntary instruments, unless the owners duplicate certificate is certificate. Besides, a Register of Deeds has no authority to
presented for such purpose, except in cases expressly provided by register a conveyance in fee without the presentation of the
In a certain action for mandamus, 51 instituted with the law or upon the order of the court for cause shown. Whenever such vendors duplicate certificate, unless he is ordered to do so by a
Supreme Court, a question which calls for an answer with a far- order is made, a memorandum thereof is entered upon the new court of competent jurisdiction.53
reaching effect was raised as to whether the Roman Catholic certificate of title and upon the owners duplicate.
Apostolic Administra-tor of Davao, Inc., a corporation sole with a The only exception to this rule is in the case of a sale of an
Canadian citizen as the actual incumbent, may acquire by purchase With respect to an additional duplicate of the title, such as may unsegregated portion of a parcel of land covered by a certificate
private agricultural land in the Philippines without violating the be withheld by a mortgagee, the surrender thereof is not absolutely of title. When a deed in fee is for a part only of the land
constitutional prohibition. After considering, among other things, indispensable. The law provides that if the mortgagee refuses or fails described in a certificate of title, the Register of Deeds cannot
the fact that although the actual incumbent of such corporation sole to deliver within a reasonable time to the Register of Deeds the enter a new certifi-cate of title to the purchaser until a
may be an alien, inasmuch as such land could only be acquired by duplicate or copy of the certificate of title surrendered by the owner, subdivision plan of such land showing all the portions or lots into
him not as owner but as mere administrator in accordance with the after advice by said officer, in order to enable him to register or an- which it has been subdivided, and the technical descriptions of
Canon Law which provides that church temporalties are owned by notate thereon another real right acquired by said owner, the record each portion or lot have been veri-fied and approved by the
the Catholic Church as a moral person with the ordinary or bishop or annotation made on the certificate in the register book shall be Director of Land. Instead, the Register of Deeds, upon written
as administrator, and hence such land as acquired by a corporation valid for all legal purposes. It is to be noted, however, that the issu- request of the party concerned, makes only a memorandum of
sole is held only in trust for the benefit of the faithful residing ance of mortgagees duplicate title has been discontinued. such deed of conveyance on the sellers certificate of title, said
within its territorial jurisdiction, and after considering further the memorandum to serve as a notice to third parties of the fact that
fact that the Roman Catholic Apostolic Church in the Philippines has Owners duplicate certificate as conclusive authority to such portion or lot has been sold to the person or persons named
no nationality and also that the fram-ers of the Constitution did not register accompanying deed. in said deed.54
have in mind such religious corporation when they provided that at
least sixty percent of the capital of a corporation should be owned The Register of Deeds has no authority to register a convey-ance Forged deed as root of valid title.
by Filipinos, the Court held that the sale of land in favor of the in fee simple without the presentation of the vendors duplicate
Roman Catholic Apostolic Administrator of Davao, Inc., though the certificate unless he is ordered to do so by a court of competent juris- A forged deed is a nullity and conveys no title. 55 A
actual incumbent be a Canadian citizen, does not violate the diction.52 Section 53 of P.D. No. 1529 provides that the production of subsequent registration affecting registered land procured either
fundamental law and therefore may be registered. It is, of course, the owners duplicate certificate whenever any voluntary instrument is by means of a forged deed or through the use of forged duplicate
assumed and this is a matter of public knowledge that the Catholic presented for registration shall be conclusive authority from the certificate of title, will not operate to convey the land or affect
population of Davao consists overwhelmingly of Filipinos, or far registered owner to the Register of Deeds to enter a new certificate or title thereto inasmuch as the law will not permit its provisions to
more than sixty percent. to make a memorandum of registration in accordance with such be used as a shield for the commission of fraud.
instrument, and the new certificate or memorandum shall be bind-ing
Importance of address in the records. upon the registered owner and upon all persons claiming under him, A deed of sale executed by an impostor without the
in favor of every purchaser for value and in good faith. This does not authority of the owner of the land sold is a nullity, and
8
registration will not validate what otherwise is an invalid document. title for value and that, under Section 55 of Act No. 496, he is the
However, where the certificate of title was already transferred from absolute owner of the land.60 The important thing to note in this case Good faith, or lack of it, is a question of intention. A
the name of the true owner to the forger, and while it remained and in other cases bearing similar set of facts is that the party given purchaser cannot close his eyes to facts which should put a
that way the land was subsequently sold to an innocent purchaser, the protection of the law must have relied on the records found in reasonable man upon his guard, and then claim that he acted in
the vendee had the right to rely upon what appeared in the order in the registry, and that he acquired the property or rights good faith under the belief that there was no defect in the title of
certificate and, in the absence of anything to excite suspicion, was therein in good faith and for value. the vendor. Baja did not make any reasonable inquiry regarding
under no obligation to look beyond the certificate and investigate the status of the property in question, despite being aware that
the title of the vendor appearing on the face of said certificate. 56 In another case where the registered owner, fearing that he the property was still in the possession of the petitioners.
This is a concrete instance to illustrate how a forged deed may be might lose his owners copy of the title during his evacuation, en- (Lucena vs. CA, G.R No. L-77468, Aug. 31, 1999).
the root of a valid title in a bona fide purchaser. trusted it for safekeeping to another person, later to find out that his
land was mortgaged to a bank by means of a forged instrument, Torrens title Between one who claims ownership of the
In another case, where A and B were joint owners of certain which mortgage was registered and subsequently foreclosed, and dis-puted property on the basis of a survey and subdivision plan
land which was mortgaged to C by A, the latter acting for himself then the mortgaged property sold at public auction to the same bank, and another whose claim of ownership flows from an original
and as attorney-in-fact of B, the court, finding itself confronted with it was held that where the property mortgaged was not owned by the certificate of title in the name of their parents the latters
a predicament, resorted to the maxim that as between two mortgagor the mortgage is null and void, and the purchaser of the claim will prevail. Requisites of an action for reconveyance: (1)
innocent persons, one of whom must suffer the consequences of a mortgaged property acquired no better rights, the registration of the clear and convincing evidence of title to the property; and (2)
breach of trust, the one who made it possible by his act of mortgage notwithstanding.61 The conclusion arrived at in this par- fact of fraud committed by the party who registered the property
confidence must bear the loss. The right of C, the mortgagee, was ticular case is premised, among other things, upon the last proviso to in his/her name. Said action presupposes the existence of a
upheld as against B, the court holding that when a mortgagee relies the second paragraph of Section 55 of Act No 496 (now Section 53 of defrauded party who is the lawful owner of the disputed property
upon a Torrens title and loans money in all good faith on the basis P.D. No. 1529), which states that registration procured by the an element not established in this case. (Heirs of Brusas vs.
of the title standing in the name of the mortgagor, only thereafter presentation of a forged deed is null and void. It was also taken into CA, G.R. No. 126875, Aug. 26, 1999).
to discover one defendant to be an alleged forger and the other consideration in the decision of this case that a co-principal in the
defendant to have by his negligence or acquiescence made it fraudulent scheme was practically connected with the bank mortga- The certificate of title serves as evidence of an indefeasible
possible for the fraud to transpire, as between two innocent gee and therefore his knowledge of the impersonation was imputable and incontrovertible title to the property in favor of the person
persons, the mortgagee and one of the mortgagors, the latter who to said institution. Of course, the principle of equity as followed in the whose name appears therein. A title once registered under the
made the fraud possible by his act of confidence must bear the case of Blondeau vs. Nano was invoked by the mortgagee, but this Torrens System cannot be defeated even by adverse, open and
loss.57 was rejected. Instead, the case of De Lara vs. Ayroso was deemed to notorious pos-session; neither can it be defeated by prescription.
be the more applicable, although it was emphasized therein that It is notice to the whole world and as such all persons are bound
To apply the above doctrine, it is essential that the fraud be before the principle of equity that as between two innocent persons, by it and no one can plead ignorance of the registration.
made possible by the owners act in entrusting the certificate of ti- one of whom must suffer the consequences of a breach of trust, the
tle to another. Where the mortgage is admittedly a forgery and the one who made it possible by his act of confidence must bear the loss Registration of the sale with the Register of Deeds
registered owner has not been shown to have been negligent or in can be applied, it is essential that the fraud was made possible by the constitutes notice to the whole world. (Heirs of Ayuste vs. CA,
connivance with the forger, the mortgage cannot be enforced owners act of entrusting the certificate of title to another. In the case G.R. No. 118784, Sept. 2, 1999).
against the owner.58 The giving of a certificate of title by the owner of Blondeau vs. Nano, however, the mortgage in question was not a
to another person is not in itself an act of negligence on the part of forgery according to the findings of the court, unlike in the cases of Purchaser in good faith.
the former; it is a perfectly legitimate act. Delay in demanding that De Lara vs. Ayroso and Parqui vs. Philippine National Bank, where the
certificate of title is likewise not an act of neglect where it does not mortgagor was an impostor. A purchaser or mortgagee cannot close his eyes to facts
appear that the owners have executed any deed or document which should put a reasonable man on his guard, and then claim
authorizing the holder of the certificate to execute deeds for and in Thus, in order that the holder of a certificate for value issued by that he acted in good faith under the belief that there was no
their behalf. But one who consents to be a mortgagee of said virtue of the registration of a voluntary instrument may be considered defect in the title of the vendor or mortgagor.
certificate of title without taking sufficient care to see to it that the a holder in good faith for value, the instrument registered should not
person who executed the deed of mortgage is the real registered be forged. When the instrument presented is forged, even if accom- In Sps. Uy vs. Sps. De Guzman, G.R. No. 109197, June 21,
owner of the property is guilty of negligence and must suffer for it. panied with the owners duplicate certificate of title, the registered 2002, it was said that while it is true that a person dealing with
owner does not thereby lose his title, and neither does the assignee registered lands need not go beyond the certificate of title, it is
Again, in another case where V forged a deed of sale to a in the forged deed acquire any right or title to the property. The likewise a well-settled rule that a purchaser or mortgagee cannot
parcel of registered land and secured the registration thereof in his innocent purchaser for value protected by law is one who purchases a close his eyes to facts which should put a reasonable man on his
own name. Then, with the title held by V in his name, he sold the titled land by virtue of deed executed by the registered owner himself, guard, and then claim that he acted in good faith under the belief
land to F under pacto de retro, a sale which became final a year not by a forged deed. Such situation does not obtain where the that there was no defect in the title of the vendor or mortgagor.
later for fail-ure of V to exercise his right of redemption. purchaser has been the victim of impostors pretending to be the His mere refusal to face up to the fact that such defect exists, or
Meanwhile, the original owner became aware of the fraud and registered own-ers but who are not said owners. 62 his willful closing of his eyes to the possibility of the existence of
brought an action to recover the property and to have the a defect in the vendors or mortgagors title, will not make him an
registration cancelled. It was held that F is an innocent holder of a The mirror doctrine. innocent purchaser for value, if it afterwards develops that the
9
title was in fact defective, and it appears that he had such notice of both the trial and respondent appellate courts, that the deed of sale A purchaser in good faith is one who buys the property of
the defect as would have led to its discovery had he acted with the from the fake Lorenzo L. Tan, Jr., to Bienvenido Almeda is a forged an-other, without notice that some other person has right to, or
measure of precaution, which may be required of a prudent man in instrument which, being a nullity, conveys no title. (Fule vs. Legare, 7 interest in, such property and pays notice of the claim or interest
a like situation. (Crisostomo vs. CA, 197 SCRA 833). SCRA 315 citing Dir. of Lands vs. Addison, 49 Phil. 19), still a forged of some other persons in the property. (Agricultural and Home
deed can be the basis of a valid title. The court has held that a Ext. Dev. Corp. vs. CA, supra; Santos vs. CA, supra; Fule vs.
In the instant case, petitioners Uy deliberately did not look fraudulent or forged document of sale may give rise to a valid title if Legare, supra; De Santos vs. IAC, 157 SCRA 259). He buys the
beyond the title of Siochi. Ordinary and simple prudence dictates the certificate of title has already been transferred from the name of property with the belief that the person from whom he receives
that they should have verified the nature of ownership of the sellers the true owner to the name indicated by the forger and while it the thing was the owner and could convey title to the property.
beyond the deed of sale, considering the amount involved, the remained as such, the land was subsequently sold to an innocent (Duran vs. IAC, Sept. 10, 1985 citing Ar-riola vs. Gomez dela
extent of the property, and knowing that the sellers were not in purchaser. (230 SCRA 550; Tenio vs. Ca; Duran vs. IAC, 138 SCRA Serna, 14 Phil. 627). A purchaser cannot close his eyes to facts
possession of the property sold, and thus, could not have delivered 489; Blondeau vs. Nano, 61 Phil. 625, Fule vs. Lagare, and Sec. 55, which should put a reasonable man on his guard and still claim
the actual and physical possession thereof. Act No. 496, Land Registration Act; Tiongco vs. dela Merced, 58 SCRA he acted in good faith. (Embrado vs. CA, supra.)
89, 92). Unquestionably, the vendee had the right to rely upon the
Concommitanly as held in Samonte vs. Gadiano, G.R. No. certificate of title. (Fule vs. Legare citing Inquimboy vs. Cruz, G.R. Sale in lump sum of land.
104223, July 12, 2001, it was held that the general rule that a per- No. L-13953, July 28, 1960).
son dealing with registered land has a right to rely on the Torrens In Balantakbo vs. CA, et al., 249 SCRA 323, it was ruled
certificate of title and to dispense with the need of making further It is a settled doctrine that one who deals with property regis- that in case of sale of land in lump sum, the area does not
inquiries admits of exceptions: when the party has actual tered under the Torren system need not go beyond the same, but control. The boundaries shall control. What defines a piece of
knowledge of facts and circumstances that would impel a only has to rely on the title, he is charged with notice only of such land is not the area calculated with more or less certainty, by the
reasonably cautious man to make such inquiry or when the burden and claims as are annotated on the title. (Santos vs. CA, 160 technical description, but the boundaries laid down as enclosing
purchaser has knowledge of a defect or the lack of title in his SCRA 550; Unchun vs. CA, 161 Phil. 479; citing Quimson vs. Suarez, the land and indicating its limits.
vendor or of sufficient facts to induce a reasonably prudent man to 45 Phil. 901). He is charged with notice only of such burdens and
inquire into the status of the title of the property in litigation. claims as are annotated on the title. (Unchun vs. CA, SCRA 710; Buyer in good faith; annotation of right usufruct.
(Sandoval vs. CA, 260 SCRA 283; see also Chu vs. Benelda Estate Agricultural and Home Extension Dev. Group vs. SCRA 563).
Development Corporation, G.R. No. 142313, Mar. 1, 2001). A property was mortgaged but there was an annotation
The aforesaid principle admits of an unchallenged exception: of the right of usufruct. The obligation was not paid,
A person dealing with registered land can rely on the title; that a person dealing with registered land has a right to rely on the hence, there was foreclosure of the mortgage. Finally,
exception. Torrens certificate of title and to dispense with the need of inquiring there was sale. Is the mortgagee-buyer, a buyer in
further except when the party has actual knowledge of facts and cir- good faith? Why?
In Juan Sandoval, etc. vs. CA, G.R. No. 106657, Aug. 1, 1996, cumstances that would impel a reasonably cautious man to make
an impostor sold the property of Lorenzo Tan, Jr. In short, such inquiry (Santos vs. CA, supra, and Bailong-Casilao vs. CA, supra, Ans. Yes, it is a well-established rule that every person dealing
somebody represented himself to be Lorenzo Tan, Jr., the owner of citing Gonzales vs. IAC, G.R. No. 69622, Jan. 29, 1988) or when the with registered land may safely rely on the correctness
a real prop-erty. Juan Sandoval, who acquired the property and purchaser has knowledge of defect or the lack of title in his vendor or of the certificate of title issued and the law will in no
with a title went to court contending that he was a buyer in good of sufficient facts to induce a reasonably prudent man to inquire into way oblige him to go behind the certificate to
faith and for value. Evidence shows that at the time of negotiation, the status of the title of the property in litigation. (SIHI vs. CA, G.R. determine the condition of the property. (Legarda vs.
his lawyer verified with the Register of Deeds and found out there No. 115548, Mar. 5, 1996, citing Capitol Subd. vs. Prov. of Negros CA, 280 SCRA 642). An innocent purchaser for value is
were two titles on the file covering the property. There was Occidental, 7 SCRA 60, 70, Manacop, Jr. vs. Cangino, 1 SCRA 572, one who buys the prop-erty of another without notice
testimony to the effect that he met Almeda, the impostor, on Leung Yee vs. E.L. Strong Machinery Co., 37 Phil. 644; PNB vs. CA, that some other person has a right to or interest in
several occasions only to admit later that he did not meet him. 153 SCRA 453, 442 and Gonzales vs. IAC, 157 SCRA 587, 595). The such property and pays a full and fair price for the
There was a certification that the land was not tenanted which was presence of anything which excites or arouses suspicion should then same at the time of such purchase or before he has
not true and known to both parties. The Su-preme Court said that prompt the vendee to look beyond the certificate and investigate the notice of the claim of another person. (Mathay vs. CA,
petitioner was not a buyer in good faith since he should have been title of the vendor appearing on the face of said certificate. (Pino vs. 95 SCRA 556).
aware of his vendors fraudulent or forged title. He was ordered to CA, 198 SCRA 434, Centeno vs. CA, 139 SCRA 545, citing Anderson
reconvey the property. vs. Garcia, 64 Phil. 506 and Fule vs. Legare, supra.). One who falls The annotation of usufructuary rights does not impose upon
within the exception can neither be denominated an innocent pur- the mortgagee-buyer the obligation to investigate the validity of
The second and more substantial question in the instant chaser for value nor a purchaser in good faith, hence, does not merit its mortgagors title. Usufruct gives a right to enjoy the property
petition is whether or not Juan Sandoval, herein petitioner, is a the protection of the law. of an-other with the obligation of preserving its form and
purchaser in good faith or an innocent purchaser for value. substance. (Art. 562, NCC). The usufructuary is entitled to all the
natural, industrial and civil fruits of the property (Art. 566, NCC)
A finding that petitioner is a purchaser in good faith will in- Who is a buyer in good faith. and may personally enjoy the thing in usufruct, lease it to
evitably be followed by a declaration that, as such, he is the rightful another, or alienate his right of usufruct, even by a gratuitous
owner of the property in question. For even granting, as held by title, but all the contracts he may enter into as such usufructuary
10
shall terminate upon the expiration of the usufruct. (Maxima Sale by non-owner; effect of subsequent death of owner. In double sales, what is relevant and material is not
Hemedes vs. CA, et al., G.R. No. 107132; R & B Insurance Corp. whether the second buyer is a buyer in good faith but
vs. CA, et al., G. R. No. 108422, October 8, 1999; J. Reyes). The son of the owner of a parcel of land sold it without his whether he registered the sale in good faith.
consent. Before he died, he donated it to another. Is the
An innocent party who relied on a registered power of sale valid? Why? The requirement of the law, where title to the property
attorney not protected. Ans. No, because of the lack of consent of the owner. If the is recorded in the Register of Deeds, is two-fold; acquisition
ven-dor is not the owner of the property at the time of the in good faith and recording in good faith. To be entitled to
In this case, A and B, husband and wife, own certain parcels sale, the sale is null and void. (Mindanao Academy vs. Yap, priority, the second purchaser must not only prove prior
of land, C forged a power of attorney purporting to show that A and 13 SCRA 190), because a person can sell only what he recording of his title but that he acted in good faith or
B granted him power to mortgage the property. The power of owns or is authorized to sell. (Art 1453, NCC; Segura vs. without knowledge or notice of a prior sale to another. The
attorney was registered in the Office of the Register of Deeds and Segura, 165 SCRA 368). One exception is when a contract presence of good faith should be ascertained from the
duly noted on the certificate of title. Armed with the certificate of entered into in behalf of another who has no authority is circumstances surrounding the purchase of the land.
title with the annotation of the power of attorney thereon, C subse-quently confirmed or ratified, in which case the (Martinez vs. CA, G.R. No. 123547, May 21, 2001).
obtained from X a loan guaranteed by a mortgage on the same transaction becomes valid and binding against him and he
property. The mortgage was registered. Subsequently, the is estopped to question its legality. (Art. 1317, NCC; Frias Torrens title.
obligation was settled and the mortgage was cancelled. Later on, C vs. Esquivel, 67 SCRA 438).
obtained a new loan from another party, Y, secured by a mortgage A torrens title is conclusive and indefeasible. It cannot be
on the same property, and the mortgage was registered. As in the In this case, the sale is void because the seller was the subject of a collateral attack and cannot be altered, modified
case of X, Y granted the loan on the strength of the power of not the owner and the authorized agent. He could not have or can-celled except in a direct proceeding.
attorney which was registered and duly annotated on the certificate parted with what he did not own. (Claudio delos Reyes, et
of title. This time it developed that the obligation owing to Y al. vs. CA, et al., G.R. No. 129103, September 3, 1999; J. The attack is direct when the object is to annul or set aside
became overdue, and the mortgage securing same was foreclosed. Reyes). such judgment, or enjoin enforcement.
A and B, upon knowing of the fraudulent transactions of C,
instituted an action in court to annul the mortgage. HELD: The It was contended that despite the sellers lack of author-ity The attack is indirect or collateral when, in an action to
mortgage was declared null and void, the same being based on a by the subsequent death of his father, he acquired the obtain a different relief, an attack on the judgment is
forged power of attorney which is without force and effect. Every property, hence, the title which he acquired passed by nevertheless made as an incident thereof.
person dealing with an agent or attorney-in-fact is put upon inquiry, operation of law to him. Is the contention correct? Why?
and must discover upon his peril the authority of the agent, and Properties registered under the name of the woman alone.
this is specially true where the act of the agent is of an unusual No, because at the time of his fathers death, he was no
nature. Even if he made no inquiry, he is chargeable with longer the owner of the property sold, as he donated it to In Guevarra vs. Guevarra, 74 Phil. 479, a parcel of land was
knowledge of the agents authority, and his ignorance of that another during his lifetime. His death could not have bequeathed in a last will and testament but registered in the
authority will not be of any excuse.63 transmitted successional rights over the property sold by name of only one of the heirs with the understanding that he
his son. would deliver to the others their shares after the debts of the
It is true that one who buys from the registered owner does original owner had been paid. Hence, the other heirs can claim
not need to look behind the certificate of title. But one who buys It is true that if a person sells that which he does not their shares in such action, judicial or extrajudicial, as may be
from a person who is not the registered owner is expected to own and subsequently acquires a title thereto by suc- necessary to partition the estate of the testator.
examine not only the certificate but also all factual circumstances cession, such title passes by operation of law to the buyer,
necessary for him to determine if there are any flaws in the title of (Art. 1434, NCC), Yes, that is true only, if at the time of Defective or void title may be the root of a valid title if it
the transferor, or in his capacity to transfer the land. 64 death of the owner, he was still the owner of the property; passes to the hands of an innocent purchaser for value.
otherwise, he cannot transmit successional rights.
Sale by non-owner validated by subsequent acquisition by A void title is a useless piece of paper. It produces no right.
seller. Since the owner donated the property to another prior In Republic vs. CA, et al., G.R. No. 99331, Apr. 21, 1999, the
to his death, his son could not have acquired it by Supreme Court, however, said that even assuming arguendo that
It is the rule that a sale made by one who is not the owner is succession. (Claudio delos Reyes, et al. vs. CA, et al., G.R. the procure-ment of the title was tainted with fraud and
a nullity. However, when such a person, who was not the owner of No. 129103, September 3, 1999). misrepresentation, a defective title may be the source of a
the land he has sold or alienated, afterwards acquires title thereto, completely legal and valid title in the hands of an innocent
such title passes by operation of law in accordance with Article Sales; Double sale. purchaser for value. In Gloria Cruz vs. CA, 281 SCRA 492, it was
1434 of the New Civil Code to the buyer or grantee, because the said:
vendors subsequent acquisition of the thing sold or alienated would Bayoca vs. Nogales
have the effect of making his previous conveyance valid thru G.R. No. 138201, Sept. 21, 2000
estoppel by deed.65 Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquired
11
rights over the prop-erty the court cannot disregard such records and papers relating to registered land in the Office of the secured and presented the owners duplicate certificate of title to
rights and order the total cancellation of the certificate. The Register of Deeds are open to public inspection, subject only to such the Register of Deeds, who completed the registration of such
effect of such an outright can-cellation would be to impair reasonable regulation as may be prescribed by the Administrator of posterior transaction, prevails over the former both under the law
public confidence in the certificate of title, for everyone Land Registration Authority, with the approval of the Secretary of and the broad principle of equity.70
dealing with property registered under the Torrens system Justice.66
would have to inquire in every instance whether the title has Failure to examine entries not constituting negligence.
been regularly or irregularly issued. This is contrary to the While the Register of Deeds has discretion to determine the
evident purpose of the law. Every person dealing with reg- manner in which persons desiring to inspect, examine or copy the Negligence should not be imputed to one who did not go
istered land may safely rely on the correctness of the records in his office may exercise their rights, such power does not behind a certificate of title in view of the fact that if the Register
certificate of title issued therefor and the law will in no way carry with it the authority to prohibit.67 of Deeds has performed his legal duty such a certificate should
oblige him to go behind the certificate to determine the show all en-cumbrances on the land described therein. 71
condition of the property Copies of instruments.
. . . Date of registration prevails over date of discovery.
Deeds and voluntary instruments are presented in the Office of
Order of entries and payment of fees. the Register of Deeds with their respective copies which are re-turned For the purposes of reckoning the period of prescription in
to the person presenting after the same have been attested and relation to an action to annul a supposedly fraudulent transaction
Section 56 of Act No. 496, as amended by P.D. No. 1529, sealed, and indorsed with the file number. Certified copies of all involving registered land, an earlier date of registration thereof
directs that each Register of Deeds shall keep an entry book in instruments filed and registered may be obtained at any time, upon will be taken into account as against a subsequent date of its
which, upon payment of the filing fee, he shall enter in the order of payment of the fees prescribed therefor.68 actual dis-covery. Thus, it was held that the weight of authorities
their reception all deeds and other voluntary instruments, and all is to the effect that the registration of an instrument in the Office
copies of writs or other processes filed with him relating to With the passage, however, of Republic Act No. 456, it is now of the Register of Deeds constitutes constructive notice to the
registered land. He shall note in such book the year, month, day, required that every document of transfer of alienation of real property whole world, and, there-fore, discovery of fraud is deemed to
hour, and minute of recep-tion of all instruments, in the order in filed with the Register of Deeds be accompanied with an extra copy to have taken place at the time of the registration.72
which they were received. They shall be regarded as registered be transmitted by said officer to the city or provincial assessor,
from the time so noted, and the memorandum of each instrument irrespective of whether said document has been registered or denied The mirror principle
when made on the certificate of title to which it refers shall bear registration. But mere failure to furnish the required extra copy of the
the same date. document will not operate to invalidate what otherwise is a valid A purchaser is not required to explore beyond what the record
agreement. in the registry indicates on its face, in quest for any hidden
The entry in the day book must be accompanied with the pay- defect or inchoate right which may subsequently defeat his
ment of entry fee amounting to five pesos per document. But no Priority of registration determined according to entries in day right thereto. (Viray vs. CA, SCRA 468).
reg-istration, annotation, or memorandum on a certificate of title book.
may be made unless the registration fees prescribed therefor are The prevailing doctrine is that a mortgagee has a right to rely in
paid within fifteen days after the date of the filing or entry in the The order of entries made in the day book prescribed under good faith on the certificate of title of the mort-gagor to the
day book, which entry becomes automatically null and void in case Section 56 of P.D. No. 1529 determines the priority in registration. It property given as security and in the absence of any sign
of default in the payment of the registration fees within said period should be borne in mind, however, that entry in the day book is the that might arose suspicion, has no obligation to undertake
of fifteen days. The advance payment of fees for entry or preliminary step in registration, while the annotation of memoran- further investigation. (Cebu International Finance
registration is not however required of the Government. dum or the issuance of a new certificate of title is the final step to ac- Corporation vs. CA, 268 SCRA 178).
complish registration. Usually the first step and the last step are not
Who spends for registration of sale. completed on the same day. It is, however, of no consequence when Effect of registration of title in the hands of a buyer in bad
actual registration is finally accomplished, for, when accomplished, its faith; prescription of an action for reconveyance; laches.
By express provision of Article 1487 of the new Civil Code, the effect retroacts as of the date of the entry in the day book. But, if it
expenses for the registration as well as for the execution of the sale could not be accomplished at all, the primary entry in the day book In Vda. de Cabrera vs. CA, 267 SCRA 339, the Supreme
are to be borne by the vendor, unless there is a stipulation to the automatically loses its force and effect. Court held that registration does not vest title, it is merely
con-trary. Attorneys fees for the preparation of the necessary evidence of such title over a particular.
papers and cost of documentary stamps are deemed included in Thus, it was held that when the land which is the subject of a
such expenses. sale is registered in the name of the purchaser, registration takes The defense of indefeasibility of Torrens title does not
effect retroactively as of the date the deed was noted in the entry extend to a transferee who takes the certificate with notice of a
Registered instruments as public records. book by the Register of Deeds, and not when final registration was flaw in his title.
accomplished.69 However, the mere filing of a document and its an-
Every deed or other instrument, whether voluntary or involun- notation in the primary entry book is not enough for the purpose of An action for reconveyance of a parcel of land based on
tary, so filed with the Register of Deeds is numbered and indexed, establishing priority, and a third party who in good faith accepted the implied or constructive trust prescribes in 10 years, the point of
and indorsed with a reference to the proper certificate of title. All same property in a posterior transfer from the registered owner and reference be-ing the date of registration of the deed of the date
12
of issuance of the certificate of title over the property but this rule Chapter IX
applies only when the plaintiff or the person enforcing the trust is Issuance of transfer certificate after execution sale. CONVEYANCE IN FEE
not in possession of the property; since if the person claiming to be
the owner thereof is in ac-tual possession of the property the right In Tagaytay Tourist Development Corporation vs. CA, 273 SCRA Procedure in transferring registered land.
to seek reconveyance, which in effect seeks to quiet title to the 182, the Supreme Court held that the purchaser at an execution sale
property, does not prescribe. may petition for the issuance of a new certificate of title to him, An owner desiring to convey in fee a registered land must
subject to the condition that before entry of a new certificate of title, have to execute a deed of conveyance, which the grantor or the
Protection of buyers in good faith. the registered owner may pursue all legal and equitable remedies to grantee may present to the Office of the Registry of Deeds where
impeach or annul such proceedings. the land lies, producing therewith the grantors duplicate
In Islamic Directorate vs. CA, 292 SCRA 454, the Supreme certificate. Thereupon, the Registrar makes out in the registration
Court reiterated the rule that under the Torrens system of Petitioner had the right to avail of its legal and equitable rem- book a new certificate of title, in duplicate, in the name of the
registration, the minimum requirement for one to be a buyer in edies to nullify the delinquency sale. grantee, delivering to him the duplicate marked owners
good faith is that the vendee at least sees the owners duplicate duplicate certificate. Upon the original and duplicate certificates
copy of the title and relies on the same. Issues raised before the RTC sitting as a land registration or as a the Registrar notes down the date of the transfer, the volume and
cadastral court involved substantial or controversial matters and page of the registration book where the new certificate is entered
Effect of registration of simulated sale. consequently beyond the said courts jurisdiction. or registered, and a reference by number to the next preceding
certificate. The grantors duplicate certificate, which was
In Santiago vs. CA, 278 SCRA 98, the Supreme Curt held that Relief under Section 107 and 108 of P.D. No. 1529 can only be surrendered, is stamped with the word cancelled, and the deed
where one does not have any rightful claim over real property, the granted if there is unanimity among the parties, or that there is no of conveyance filed with proper indorsement showing the number
Torrens system of land registration can confirm or record nothing. adverse claim or serious objection on the part of any party in interest, and place of registration of the certificate of title of the land
otherwise, the case becomes controversial and should be threshed conveyed.1
The fact that the petitioners were able to secure a title in their out in an ordinary case or in the case where the incident properly
names, TCT No. 148989 did not operate to vest upon petitioners belongs. Description of land.
ownership over Paula Arcegas property. That act has never been
recognized as a mode of acquiring ownership. As a matter of fact, Extent of obligation covered by mortgagee. The land object of the conveyance must be properly
even the original registration of immovable property does not vest described, with lot number, block number, location, boundaries,
title thereto. The Torrens system does not create title. It only In Quintanilla vs. CA, 279 SCRA 397, the Supreme Court held and area. Where two persons engaged, the one to sell and the
confirms and records titles already existing and vested. It does not that an action to foreclose a mortgage is usually limited to the other to purchase, a given piece of property with visible
protect a usurper from the true owner. It cannot be a shield for amount mentioned in the mortgage, but where on the four corners of boundaries which are agreed upon by the contracting parties as
commission of fraud. It does not permit one to enrich himself at the the mortgage contract the intent of the contracting parties is manifest the land to be bought and sold, and the vendor by a mistake in
expense of another. (Esquivas vs. CA, 272 SCRA 283). that the mortgaged property shall also answer for future loans or ad- the description in the conveyance included therein land
vancements, then the same is not improper as it is valid and binding previously sold to a third person not included within the visible
Possession; effect of execution of deed of sale. between the parties. boundaries referred to, an action will lie in favor of the vendor to
correct the instrument so as to describe correctly the land
In Power and Industrial Corporation vs. CA, 274 SCRA 579, Restriction of homestead right to dispose of the land within 5 actually sold. Under such circumstances, the purchaser, although
the Supreme Court held that prior physical delivery or possession is years. the title to the land described in his conveyance had been duly
not legally required and the execution of the deed of sale is deemed registered under the Torrens system, and he received, as a result
equivalent to delivery. This deed operates as a formal or symbolic Encumbrances has been defined as anything that impairs the of the purchase and sale, a certificate of title issued in pursuance
delivery of the property sold and authorized the buyer to sue the use or transfer of property, anything which constitutes a burden on of P.D. 1529, did not obtain an indefeasible title to the land
document as proof of ownership. the title, a burden, charge or lien upon property. mistakenly included in said certificate of title.2

Sale with assumption of mortgage. The restriction on the enjoyment of property imposed by a Where the description of the titled property appearing in the
contract of lease sufficiently meets the definition of an encumbrance deed did not tally with that appearing in the certificate of title,
In Ramos vs. CA, 279 SCRA 118, in sales with assumption of under Section 118 of the Public Land Act because such contract im- nor was the location of said property even mentioned, nor the
mortgage, the assumption of mortgage is a condition to the sellers pairs the use of the property by the grantee during the term of the block or cadastral lot numbers written in words and figures, the
consent so that without approval of the mortgagee, no sale is per- lease, the granting of the patent can not enjoy the beneficial use of deed is defec-tive and unregistrable.3
fected. the land leased. Even if only part of the property has been sold or al-
ienated within the prohibited period of five (5) years, such alienation Boundaries prevail over area; the rule and the
Where the Deed of Absolute Sale with assumption of is sufficient cause for the reversion of the whole estate to the state. exceptions.
mortgage is ineffective, the seller remains the owner and (Republic vs. CA, 281 SCRA 639).
mortgagor of the property and as such he retains the right to oOo The rule is well-settled that where it appears that the land
redeem the foreclosed property. is so described by boundaries as to put its identification beyond
13
doubt, an erroneous statement relative to the area of the lots, designated by numbers or letters, the Register may, if desired by the Court of First Instance (now Regional Trial Court) of the city
questioned parcel may be disregarded because what really defines the grantor, instead of cancelling the latters certificate and issuing a or province where the land lies. The court after due notice and
a piece of ground is not the area but the boundaries therein laid new one to the same for the remaining unconveyed lots, only enter hear-ing, determines the case and all questions arising in
down. This does not apply, however, where the boundaries relied on said certificate and on its owners duplicate a memorandum of connection with such subdivision plan. 12
upon do not identify the land beyond doubt. 4 Neither does the rule such deed of conveyance and of the issuance of the transfer
apply where the boundaries given in the registration plan do not certificate to the grantee for the lot or lots thus conveyed, and the
coincide with the outer bounda-ries of the land covered and grantors certificate of title with such memorandum shall be effectual Limitation to right of new owner of part of land included in
described in the muniments of title.5 for the purpose of showing the grantors title to the remainder of the former owners certificate.
land not conveyed, with the same effect as if the old certificate has
In other words, it is only when the boundaries given are suf- been cancelled and a new certificate for such land has been issued. Under the old practice, the new owner of part of land, which
ficiently certain and the identity of the land clearly proved by the And even if there has not been any transfer certificate issued to a had not yet been segregated from the bigger mass of the
boundaries thus indicated, that an erroneous statement concerning grantee for part of the land conveyed to him, the conveyance cannot property, could subsequently deal with his undivided portion by
the area can be disregarded or ignored. Otherwise, the area stated be considered invalid by reason of nonissuance of a new certificate of selling, mortgaging, or otherwise disposing of the same without
should be followed.6 title.9 waiting for the approval of the subdivision plan by the Bureau of
Lands, in the same way as if he had a certificate of title for his
Again, where the boundaries are found to be correct and The rule under the Civil Code regarding the obligation of the own portion. All such transactions used to be inscribed on the
intact, and there is a conflict between the area and the boundaries, seller to deliver a thing certain is not modified by Section 58 of Act certificate of title of the former owner, sometimes form a chain of
it is elemental that the latter shall prevail.7 496 prohibiting the issuance of a certificate of title to a purchaser for annotations. To obviate this difficulty, Republic Act No. 93 has
part of a registered parcel of land until the corresponding subdivi-sion made it a point that, after the annotation of the sale of a portion
Incidentally, where the sale of real estate was made for a plan and technical description shall have been approved by the of land on the grantors certificate of title, no subsequent deed or
lump sum and not at a definite price for a unit of measure, such as Director of Lands, and authorizing only the entry of a memorandum other voluntary instrument relative to the same portion of land
per square meter, although the resulting area upon subsequent on the sellers certificate of title meanwhile pending the submission of may be accepted for registration or annotation until the
verifica-tion may be found to be greater or less than that stated in such approved plan. The latter legal provision is purely a procedural necessary subdivision plan and technical descriptions of the re-
the deed, the price originally agreed may not be increased nor directive to the Register of Deeds which does not attempt to govern sulting lots, as approved by the Director of Lands, shall have
decreased, so long as the vendor has delivered to the vendee all the rights of vendor and vendee inter se that remain controlled by the been filed with the Register of Deeds and the proper transfer
that is included within the boundaries indicated. However, in case of Civil Code. It does not even bar the registration of the contract itself certificate of title issued in the name of the person executing
default on the part of the vendor, he may suffer a reduction in the in order to bind the land involved therein.10 such deed or instru-ment.
price in propor-tion to what is lacking in area, without prejudice on
the part of the vendee to rescind the contract if he so chooses. 8 In some instances the sale of subdivision lots may have to be However, the rule has to some extent been relaxed with the
withheld, in which case the vendee cannot be compelled to pay the passage of Republic Act No. 1096, further amending Section 58
Conveyance of part of land covered by title. full price. Section 2 of the rules and regulations promulgated by the of Act No. 496, wherein it is provided that for the purpose of
National Urban Planning Commission provides, among other things, securing loans from banking and credit institutions the legal
When a deed in fee is for a part only of the land described in a that no subdivider shall proceed with the sale of lots of a subdivision prohibition against the acceptance for registration or annotation
certificate of title, or for one or more of the several lots into which until the subdivision plan is approved by the Director of Planning. of a subsequent deed or other voluntary instrument shall not
said land shall have been subdivided, the Register of Deeds does Where, therefore, the right of the vendor to execute a deed of sale of apply in the case of deeds of sale duly executed by the
not enter any transfer certificate to the grantee until a plan of such lots of a subdivision is subject to such approval, the vendee cannot, Government, or any of its instrumentali-ties, with respect to
land showing all the portions or lots into which it has been before approval of such plan, be compelled to perform his prestation portions of lands registered in the name of the Republic of the
subdivided, and the corresponding technical description of each Philippines.
portion or lot has been verified and approved by the Director of payment of the purchase price. The reason is that until the plan is
Lands. However, upon written request of the party concerned, the approved, the area of the lot which the vendee could definitely Subsisting encumbrances to be carried over to new title.
Registrar may make a memorandum of such deed of conveyance on acquire, and whose ownership the vendor could transfer under the
the grantors certificate of title and on its owners duplicate, this sale, cannot be determined, and, accordingly, the vendor is not in a As provided by Section 59 of P.D. No. 1529, if at the time of
memorandum to serve only as a notice to third parties of the fact position to comply with his obligation on warranty under Article 1495 any transfer there appear upon the registration book
that such portion of lot has been sold to the person or persons of the new Civil Code. encumbrances or claims adverse to the title of the registered
named in said deed. Upon the approval of the plan and technical owner, they shall be stated in the new certificate or certificates,
descriptions, a certified copy thereof may be filed in the office of Discrepancy between subdivision plan and plan of origin except such as may have been simultaneously released or
the Register and recorded in the corresponding certificate of title, reported to court. discharged.
and thereupon the Register may, after entering the transfer
certificate of title and issuing an owners duplicate to the grantee In case there is any discrepancy between the subdivision plan Annotations of encumbrances which have previously been
for the portion sold, also enter a new certificate and is-sue an and the original plan, and in the opinion of the Director of Lands such can-celled need not be carried forward to the new certificate of
owners duplicate to the grantor for the part of the land not discrepancy may be prejudicial to an adjoining owner or other person title. While they may serve at most to show the history of
included in the deed. If the land has been subdivided into several having interest in the adjoining land, the matter should be reported to previous transactions affecting the property described in the title,
14
they have no room in the new title if they no longer subsist, and to relating to the first lien in favor of the Government to guarantee the or administration. While such guardian and administrator may be
incorporate them therein would not only be a surplusage but may payment of such cadastral costs. However, if the apportionment of exempt from securing judicial appointment and from filing a
even confuse the mind with such annotations which, in the eyes of costs has not yet been decreed, the Register shall endorse on the new bond, still the parents authority cannot extend to acts of
the law, are no longer of any force and effect. certificate of transfer issued by him the encumbrance or lien encumbrance or disposition as distinguished from acts of
appearing on the former certificate. management or administra-tion.21
A party who sells registered land subject to the covenant that
it shall be used only for residential, commercial, or educational Vested right in contract to sell. Under Articles 320 and 326 of the New Civil Code, the
purposes, annotated on the title of the vendee, has a cause of father or mother of a child owning property worth more than
action against a subsequent purchaser whose title bears the same A sale is perfected between the seller and the buyer, and obliga- P2,000.00 does not automatically become the legal administrator
restric-tion, notwithstanding the fact that the deed of conveyance tory on both, upon agreement on the subject matter and the price, of the lat-ters property, but must apply to the court for
in his favor does not mention such restriction. Limitations of this even if neither has been delivered; and more so, if the enjoyment and appointment of legal guardianship of the property, which may
nature imposed by the owner have been sustained. The restrictive possession of the land is transferred. In the case of an agricultural even be given by the court to another person for good reasons. 22
covenant binds the subsequent purchaser, a privy. For, it is land, object of a contract to sell executed on April 4, 1934, or before
axiomatic that contracts are enforceable against the parties and the adoption of the Constitution on November 15, 1935, the buyer Sale with duress.
their privies.13 being an alien, it was held that the sale is not affected by the consti-
tutional prohibition due to vested right which one cannot be deprived In order that duress may be sufficient to void a sale
It may also be stated in passing that a limitation imposed by of without due process of law.16 contract, Article 1267 (now 1335) of the Civil Code requires that
the seller such as, for instance, that only one single family house the intimi-dation be reasonable and well grounded. This
may be constructed on a single lot, although a separate servants A vested right is one which is absolute, complete, and uncondi- presupposes that the threatened injury to the person or property
quarter or garage may be built, which is more or less a standard tional, to the exercise of which no obstacle exists, and which is im- must be probable and serious, and that the person from whom
provision found in a contract to sell involving lots in large mediate and perfect in itself and not dependent upon a contingency. the intimidation comes has the necessary means to inflict the
subdivisions where the owners seek to establish in the locality a To be vested in its accurate legal sense, a right must be complete and threatened injury.23
high-class residential neighborhood, if ever violated, may not be consummated, and one of which the person to whom it belongs
sufficient ground to rescind the contract to sell. Of course, such cannot be divested without his consent. 17 Thus, in order to cause the nullification of acts executed
limitation is valid because it pro-motes aesthetics, health and during the Japanese occupation, the duress or intimidation must
privacy, and prevents overcrowding. It is reasonable and not Sale in behalf of a minor. be more than the general feeling of fear on the part of the
against public policy and the law. But a breach of such stipulation, occupied over the show of might by the occupant. In other
in order to be sufficient cause for rescission, must be substantial Without the courts authority or approval, the sale is ineffective words, there must be specific acts or instances of such nature
and fundamental as to defeat the object of the parties in making as to a minor child, even if the one who executed the sale is the mi- and magnitude as to have, of themselves, inflicted fear or terror
the agreement. Casual or unsubstantial breaches cannot serve as nors judicial guardian. A guardian has no authority to sell the real upon the subject thereof, in order that his execution of the
basis for cancellation or rescission, for the law is not con-cerned estate of his ward, merely by reason of his general powers, and in the questioned deed or act cannot be considered voluntary.24
with trifles. For Article 1191 of the Civil Code to apply, both absence of any special authority to sell conferred by will, statute or
relations must arise from the same cause, such that one obligation order of court.18 A sale of the wards realty by the guardian without Inadequacy or non-payment of price alone cannot
is correlative to the other, and besides the right to rescind or authority from the court is void.19 invalidate sale.
resolve a contract is not absolute. The proper remedy in case of
such breach is not rescission or cancellation of the contract but the Under the provision of Article 326 of the New Civil Code, where Inadequacy of price may be a ground for setting aside an
removal of the prohibited constructions.14 the property of the minor child is worth more than P2,000.00, the execu-tion sale, but is not sufficient ground for the cancellation
father or the mother who may act as legal guardian of the childs of a volun-tary contract of sale otherwise free from invalidating
Encumbrance relating to cadastral costs; when carried property is subject to the duties and obligations of guardians under defects. Neither nonpayment of price alone may invalidate or
forward to new title. the Rules of Court. Where, however, the value of such property is less make rescissible a sale unconditionally consummated, nor does it
than P2,000.00, it was held that the required judicial authority for constitute a lien or en-cumbrance on the property sold. For that
According to law, it is the duty of the Register of Deeds to de- alienation or disposition of the minor childs property may be reason, mere failure on the part of the buyer to pay the price
mand of the vendor before registering the deed of sale of his lot, to dispensed with inasmuch as the father, or, in his absence, the mother within the period stipulated is not a ground for the resolution of
exhibit the receipt showing that the encumbrance or lien relating to is allowed by law to do it freely, subject only to the restrictions the sale, in the absence of a condition that such default should
cadastral costs has already been paid. Such is the rule in the case imposed by the scruples of conscience.20 operate to resolve the contract.25 However, it is now provided in
of a sale, transfer, or conveyance, for a pecuniary consideration, of the new Civil Code (Article 2242) that unpaid price of real
any property or part thereof burdened with such lien. The vendor or The foregoing ruling notwithstanding, it may be mentioned here property sold constitutes an encumbrance thereon.
his legal representative is required to pay the cadastral costs in that in a subsequent case involving an application for an insur-ance
their entirety in case an order apportioning the costs has already policy loan, the Supreme Court held that even if the interest of the Accordingly, it was held that in the sale of real property
been issued in the cadastral proceeding in which the property being minor-beneficiary were less than P2,000, the father as the legal sub-sequent nonpayment of the price at the time agreed upon
sold, transferred, or conveyed is included. If evidence of payment is guardian could not give valid consent thereto without court authority does not convert the contract into one without cause or
pre-sented, there is no need of carrying forward the annotation inasmuch as such act is one of dominion and not mere management consideration: a nudum pactum. The situation is rather one in
15
which there is failure to pay the consideration, with its resultant object is delivered.31 Neither may such contract be rescinded for late been partly or irregularly complied with or when the penalty is
consequences. In such a case, the vendors remedy is generally to install-ments unless objected to by the seller. Accordingly, it was held found to be iniquitous or unconscionable, and under Article 2227
demand legal interest for the delay or to demand rescission in that acceptance, without objection, of late payments constitutes a of the same Code, liquidated damages, whether intended as an
court. Although the contract of sale expressly provides for waiver of the right to rescind for non-payment of the installment indem-nity or a penalty, shall be equitably reduced if they are
automatic rescission upon failure to pay the price, the vendee within the period specified in the contract to sell. 32 iniquitous or unconscionable.38
may still enforce the contract even after the expiration of the
period, but, of course, before demand for rescission has been made However, if the acceptance by the seller of some payments on Special conditions in sales of subdivision lots, how con-
upon him either by suit or by notarial act.26 installments in arrears is but an act of forbearance to give the buyer strued.
an additional opportunity to keep the contract alive, the seller is not
On the other hand, in the case of underpricing, it was held estopped to rescind the contract for subsequent failure on the part of There is a prevailing practice among subdivision owners to
that where the vendor and the vendee understated the purchase the buyer to amortize the balance of the consideration of the sale. 33 impose special conditions or obligations upon purchasers of
price of the thing sold, presumably to minimize the payment of For the protection of the rights and interests of subdivision buyers subdivi-sion lots usually setting restrictions in the construction of
registration fees, stamps, and sales taxes, the parties are in pari under contract to sell, it is now a legal requirement that such contract buildings and improvements and sometimes even prohibiting the
delicto in com-mitting tax evasion and should not receive any as well as other similar instruments relative to the sale or conveyance resale of the property within a specified period. In a certain case
consideration from any court in respect to the money paid for the of subdivision lots, whether or not the purchase price is paid in full, decided where the contract of sale imposed a special condition
sale. Their situation is similar to that of the parties to an illegal be registered by the seller in the Register of Deeds of the province or upon the vendee to construct a house and to complete at least
contract. The law will not aid either party but will leave the parties city where the property is situated. The subdivision owner or 50% of the construction within a period of two years, the
where it finds them.27 In other words, the court will keep its hands developer may not even mortgage any lots without the prior written performance of which was guaran-teed by a surety bond subject
off in any incident that may be subject of litigation arising under approval of the National Housing Authority and, if approved, the to forfeiture in favor of the vendor, it was held that such
such transaction. mortgage loan shall be used for the development of the subdivision condition is in reality an obligation with a penal clause and the
project and effective measure are to be taken to ensure such obligors liability may be mitigated pursuant to Article 1229 of the
Contract of promise to sell, rescissible without court utilization.34 Civil Code, considering that such penalty is intended not to
intervention. indemnify the vendor for any damage that may be suffered as a
Installment sale with forfeiture clause. result of the breach of contract, but rather to compel
In a contract of promise to sell, suppose it was stipulated that performance and thus encourage home building among lot
in case of default on the part of the vendee promisee, the vendor- In a case of sale on the installment basis, wherein it was stipu- owners of the subdivision. Such stipulation may not be construed
promi-sor, without filing any action in court, has the right to rescind lated that in the event of default on the part of the purchaser, the as imposing a strictly personal obligation upon the purchaser. To
the contract, take immediate possession of the property subject seller may, at his option, recover possession of the property and con- adopt such a construction would be to limit his right to dispose of
matter thereof, and even sell it to another party. The question that sider all sums previously paid as rental for the use and occupancy of the lot, which limitation on one of the rights of ownership must
may arise is whether the vendor-promisor may rescind the the property, it was held that Article 1504 (now Article 1592) of the rest upon more explicit language in the contract and it cannot be
contract, without instituting any action in court, in apparent Civil Code, requiring that demand for rescission of the contract of sale left on mere inference.39
violation of Article 1504 (now Article 1592) of the Civil Code. In be made either judicially or by a notarial act, does not apply. 35 The
that case it was held that the contract in question not being a sale reason for this conclusion is that in a sale by installment ownership or A stipulation in the sale of subdivision lots that all
but a mere promise to sell, the provision of said article of the Civil title does not pass until after the payment of the last installment. This buildings, including garages, servants quarters and addition
Code does not apply, and therefore the contract may be rescinded ruling is in accordance with the Land Registration Act, under which a thereto or ports thereof shall be constructed at a distance of not
without going to court according to the stipulation of the parties. 28 contract cannot affect the transfer of ownership and title of the less than five meters from a certain street, is held to be a valid
Thus, Article 1592 of the Civil Code of the Philippines which gives property unless a deed of absolute sale is executed and the instru- restriction and contractual limitation on the ownership of the
the buyer the opportunity to settle his obligation first before the ment registered accordingly.36 property. The fact that a building permit was issued by the
contract is rescinded, governs contracts of purchase and sale and municipality does not relieve the lot buyer of his obligation to
has no application to a promise to sell.29 Conformably to the same principle, it was held in a leading observe the restriction on his title. 40 On the other hand, a
case37 that the clause in a contract of sale, referring to the forfeiture subdivision owner or developer that, through its field agents,
In reciprocal obligations, the power to rescind is implied in of part payments, is valid. It is in the nature of a penal clause which aided by its brochures and other propaganda materials
case one of the obligors should not comply with what is incumbent may be legally established by the parties (Articles 1226 and 1306 of respecting the introduction and maintenance of streets, lighting
upon him, conformably to Article 1191 of the Civil Code. But where the new Civil Code). In its double purpose of insuring compliance with and water facilities, represents and affirms said warranties to its
the contract expressly grants the parties the power to revoke or the contract and of otherwise measuring beforehand the damages buyers, which induce them to buy the subdivision lots being
cancel the contract, judicial action therefor is not necessary. which may result from noncompliance, it is not contrary to law, offered for sale, is bound to comply with such warranties. 41
morals or public order because it was voluntarily and knowingly
A contract to sell on installment basis cannot be rescinded agreed upon by the parties. Where a contract of sale provides for a restriction of the use
simply because the seller at the time of the execution of the of the lot sold for residential purposes only, the restrictive
contract happens to be not the owner. It was thus held that a seller However, inasmuch as such stipulated forfeiture constitutes a covenant is valid and as a rule may not be nullified by a city
need not be the owner of the property at the time of the perfection penal clause, the court under Article 1229 of the Civil Code is given ordinance subse-quently classifying the land as commercial.
of the contract. It is sufficient that he be the owner at the time the the discretion to reduce the penalty when the principal obligation has However, after some radi-cal and substantial change has taken
16
place in the locality to warrant a reclassification of the lot from bind-ing and enforceable contract of sale. The offer in this case as ance; and (2) the registration of the deed, which is the operative
residential to commercial, thereby defeating the objects and well as the acceptance both lack a most essential element the act that conveys and binds the land.
purposes of the covenant limiting the use of the land sold for manner of payment of the purchase price. Hence, the offer to sell
residential purposes, such covenant should no longer be enforced. may be with-drawn without the offer or committing any breach of Double sale of same land.
It cannot stop the inevitable tide of development that has reached contract.48 So also, one who gives another an option to purchase,
the area.42 without a consid-eration, may withdraw it at any time, but if the Land may be sold twice to two different persons, although
option is exercised before it is withdrawn, the result is a perfected the possibility of success in registering the two sales under the
While such restriction limiting the use of the lot for residential contract of sale.49 Torrens system is quite remote, not to say impossible. But, just
purposes only as agreed to by the purchaser and accordingly regis- in case, the rule is that the person holding under the prior
tered by way of annotation on his certificate of title may be consid- Conveyance of land includes improvements thereon. certificate is entitled to the land as against the person who
ered as covered by the protection of the Constitutional guarantee obtained the second certificate covering the same land. A
on non-impairment of contracts, yet it was held to yield to police When land is object of a sale or conveyance, all buildings and declaration of nullity of one of the titles can be obtained in an
power. To that end a resolution passed by a municipal council which improvements existing thereon are deemed to be included, unless action to quiet title under Article 476 of the new Civil Code. 54
subsequently declared the site of the property as an industrial and otherwise reserved. The word land includes every estate and inter-
commercial zone was considered as an exercise of police power to est in land as a rule. Thus, it was held that the registration of land in However, where there was bad faith on the part of one of
safe-guard and promote the health, safety and welfare of the the name of a particular person vests in him not only the title to the the purchasers of the same land, the preference is always in
people.43 land but also the title to all the improvements thereon, unless special favor of the other, in view of Article 1544 of the New Civil Code,
reservation is noted with respect to the improvements. 50 as well illustrated in the following case: Here, the land in
Generally, a contract to sell creates only a personal right. litigation was transferred twice by its former owner, now
Thus, it was held that such contract providing that the ownership of However, where only a lot is sold on installment, and the pur- deceased: first, in favor of A on Decem-ber 19, 1929, through a
the lot shall remain with the VENDOR, unless and until after the chaser after having constructed a house thereon has defaulted in the private document of sale; and then in favor of B, made ten years
purchase price has been fully paid and all obligations faithfully payment of installments, may he ask as a matter of right for an later, or on April 29, 1939, by means of a deed of cession ratified
complied with, the VENDEE acquires only a personal right, that is, extension of time to pay the installments overdue on the ground that before a notary public and later registered with the Register of
the right to the personal undertaking that upon full payment of the he has made substantial improvements thereon? Here it was held that Deeds of Camarines Sur. There is no question that B, in acquiring
installments on the lot the vendor shall sell and transfer to him the to grant his demand would imply a deviation from the rule that the land in question, knowing that it had already been sold to A,
ownership thereof.44 buildings are mere accessories to the land which is the principal. It is had not acted in good faith. HELD: That the cession in favor of B
axiomatic that everything that is built on the soil yields to the soil. 51 is null and void. The fundamental premise of the preferential
Incidentally, where the deed of sale executed by A in favor of rights established by Article 1473 (now Article 1544) of the Civil
B contains a restriction limiting the use of the land sold exclusively To the above rule that buildings are mere accessories to the land Code is good faith.55
for residential purposes and not allowing any business, industry or or that everything that is built on the soil yields to the soil, a situation
factory in the premises, carrying a sanction that in case of violation that may be considered as an exception is where a conjugal house is Article 1544 of the New Civil Code provides as follows:
thereof the seller is entitled to rescind the contract, seek the constructed on the land belonging exclusively to the husband, in
cancella-tion of the title and to repossess the property, and which case the land becomes the property of the conjugal partnership If the same thing should have been sold to different
meanwhile B resold the land to C and it is C who violated the but the partnership is indebted to the husband for the value of the vend-ees, the ownership shall be transferred to the person
restriction by constructing thereon a Meralco substation, may A land. Stated otherwise, the spouse owning the land becomes a credi- who may have first taken possession thereof in good faith,
rescind the sale between B and C? Here it was held that A cannot tor of the conjugal partnership for the value of the lot, which value if it should be movable property.
rescind such a contract because he was not a party thereto. As should be reimbursed at the liquidation of the conjugal partnership,
redress would be to directly seek the cancellation of the title of C consistent with the provision of Article 158 of the Civil Code. And, Should it be immovable property, the ownership shall
and to repossess the property. It is not for rescission of sale but for incidentally, where the husband sold the land and house specially in belong to the person acquiring it who in good faith first
restoration of title. favor of his concubine after he had abandoned his own family, it was recorded it in the Registry of Property.
held that the sale was null and void for being contrary to morals and
Promise to buy and sell, effect. public policy. Such sale was subversive of the stability of the family, a Should there be no inscription, the ownership shall
basic social institution which public policy cherishes and protects. 52 per-tain to the person who in good faith was first in the
A promise to buy and sell real estate does not pass title, but possession; and, in the absence thereof, to the person who
gives the parties the right to demand the fulfillment of the contract, Physical delivery of real estate sold not necessary. presents the old-est title, provided there is good faith.
or damages for breach if the fulfillment is impossible. 46 Any
agreement to sell is liable to be defeated by disagreement between The execution of a public document of sale is equivalent to deliv- The Supreme Court of Spain in its decision rendered on May
the parties as to its terms, or by their failure or inability to carry it ery.53 Physical delivery or the turning over of actual possession by the 13, 1908, held that although Article 1473 (now Article 1544), in
out.47 vendor to the vendee is not a legal requisite. However, when dealing its second paragraph, creates a preference for title of ownership
with registered land, delivery is not complete unless two requisites of realty first registered, this provision must be understood as
However, an accepted unilateral promise to sell, not supported concur, namely: (1) the execution of a public instrument of convey- being based always upon the good faith required in the first
by any consideration distinct from the price, does not produce a paragraph thereof, and it cannot be conceived that the legislator
17
had intended to do away with, or to sanction, bad faith by requiring execution thereof is tantamount to conveyance of the subject matter, the ven-dor,72 and therefore the vendee is the owner of the
compliance with a mere formality (the act of registration) which unless the contrary clearly follows or be deduced from such estate in fee simple subject to the vendors right of redemption.
does not always control even when third persons are involved.56 instrument itself, and in the absence of this condition such execution And he may mortgage the property or impose upon it any other
This means that the preference established in the cited article of by the vendor is per se a formal or symbolical conveyance of the charge, but if the vendor redeems it he (the vendor) is entitled to
the Civil Code depends not only upon the priority of inscription, but property sold.66 receive it free of any charge or mortgage imposed by the
also upon good faith of the second purchaser.57 Thus, under Article vendee, although he shall be obliged to respect any lease made
1544, mere registration is not enough to acquire new title. Good Thus, it may be stated in short that the possession mentioned in by the latter in good faith and in accordance with the customs of
faith must concur.58 Article 1544 of the New Civil Code (for determining who has better the place where it is situated.
right when the same piece of land has been sold several times by the Registration of pacto de retro sale.
Where possession was acquired in good faith, this character is same vendor) includes not only the material but also the symbolic
not lost except in the case and from the moment facts exist which pos-session which is acquired by the execution of a public In a sale with pacto de retro, title passes from the vendor
show that the possessor has become aware that he possesses the instrument.67 to the vendee at the time of the sale, the vendor retaining,
thing improperly or wrongfully (Article 528, New Civil Code.) This however, a right to redeem or repurchase for the price and within
excludes, of course, excusable ignorance of the provisions of the However, it is to be borne in mind that, while symbolic delivery the period stipulated. It has been said that, while the vendee has
law, which may serve as basis of good faith.59 by the execution of a public instrument is equivalent to actual de- the legal title to the property, the vendor still holds the equitable
livery, that is only true when the thing sold is subject to the control of title. In view of such peculiarity, registration of a pacto de retro
Mere occupation, or filling a parcel of land, cannot prevail the vendor.68 In other words, a person who does not have actual sale affecting land registered under the Torrens system is
against titles recorded in authentic public instruments. 60 Registra- possession of the land sold cannot transfer constructive possession effected in the same manner as mortgages; that is, by means of
tion in favor of one defeats the possession on the part of the other, thereof by the mere execution and delivery of a public document by annotation under the memoran-dum of encumbrances in the
for more credit is given to registration than to actual possession. 61 which the title to the land is transferred.69 certificate of title. The certificate of title of the vendor remains in
his name, subject only to the right or title of the vendee
The ultimate power to resolve conflicts of possession is recog- Contract with pacto de retro not abolished. endorsed thereon as an encumbrance.
nized to be within the legal competence of the civil courts.
Instruments of sale with right to repurchase, executed by virtue The right to repurchase is a real right or interest therein
Thus, a judgment of the court ordering restitution of the pos- of Articles 1507 and 1520 (now Articles 1601 and 1618, respectively) which may be registered as an interest less than an estate in fee
session of a parcel of land to the actual occupant should never be of the Civil Code, may be registered, according to Act No. 1108, simple under Section 52 of the same Act No. 496 and as such
construed as an interference with the disposition and alienation of under the same conditions and in the same manner as mortgages. goes with the land and may be claimed against any person
public lands.63 From neither the letter nor the spirit of the law can it be inferred in deriving title from the vendee.
any manner whatsoever that the said articles and others of the Civil
Possession, how determined. Code bearing on conventional repurchases have thereby been Period of redemption, when omitted or ambiguous
repealed. The language employed by the lawmaker is clear and
Where one purchaser registered his deed, there seems no positive, and his intention and purpose are manifest; it cannot In the absence of an express agreement within which the
ques-tion that his right will prevail over any other purchaser who possibly be deduced therefrom that he ever thought of abolishing or right of redemption may be exercised by the vendor in a pacto
did not register. But if none of the purchasers registered, the eliminating from the various forms of contracts and agreements de retro sale, it is deemed to last four years from the date of the
problem is how to determine the first one in possession. In a heretofore recognized, and which are not contrary to law, good contract. But, in case there has been an agreement, the period
certain case,64 one Fernandez sold a parcel of land to Marcelino morals or public order, that of the contract of sale with pacto de retro. cannot exceed ten years.75 In any event, an action to recover
Gomez and Narciso Sanchez by means of a public instrument, and It was, therefore, held that the well known form of contract of sale title to and possession of real property, upon a right of
these purchasers nei-ther registered their deed nor even took with pacto de retro still sub-sists.70 repurchase claimed to have been reserved by the vendor, does
material possession of the land. Later, Fernandez sold the same not lie after the lapse of more than 22 years, a period of time
property by means of a private document to Ramos who However, there seems to be a growing tendency to discourage sufficient not only to bar the action but to vest in the possessor
immediately entered upon the possession of it. In resolving the this kind of transaction by the legal imposition of a new requirement title to the realty by prescription.76
controversy between the first purchaser and the second purchaser, that the buyer cannot register his consolidation of ownership without
the Supreme Court held that, according to Article 1473 (now Article being accompanied with a judicial order. This is necessary because, In conventional redemption when the contracting parties
1544) of the Civil Code, Gomez and Sanchez were the first in according to the findings of the Code Commission, experience has stipu-late that the vendors may repurchase the property at any
possession and, consequently, that the sale in their favor was demonstrated too often that many sales with right of repurchase have time they have money, there is a time expressly made, which is
superior. been devised to circumvent or ignore our usury laws and for this any time. It being, however, an unlimited or indefinite time,
reason the law looks upon them with disfavor. under the second paragraph of Article 1606 of the Civil Code, it
The above ruling is a reaffirmation of the principle enunciated cannot exceed ten years.77
in an earlier case65 holding that upon a sale of real estate the Vendees title in pacto de retro.
execution of a notarial document of sale is a sufficient delivery of But, a mere agreement or stipulation that the realty or
the property sold. In a more or less the same vein, it was held that A sale with pacto de retro transfers the legal title to the chattel sold is subject to repurchase by the vendor is not an
when the sale is made by means of a public instrument, the vendee,71 and the vendee is subrogated to all the rights and actions of express stipula-tion or agreement as to the time within which the
18
repurchase may and should be made. There being no express right to repur-chase may be exercised has expired, that said period Consignation may be necessary where a mortgage debtor is
agreement or stipulation as to such time, the law supplies it by has never been extended, that no payment has been made of the attempting to redeem the mortgaged property and the creditor
providing that it shall be four years counted from the date of the amount which by reason of said sale was delivered to the vendor, and refuses to accept payment without just cause. But in the case of
execution of the contract. 78 that by virtue of the failure of the vendor to exercise his right to redemption by a vendor a retro, he is exercising a right or
repurchase, which he had a right to do, there has been consolidated privilege, and not discharging an obliga-tion. In order to preserve
Suppose the period agreed upon by the parties expired during in the vendee the absolute ownership of the property. With the such right, should the repurchase price be refused, it is not
the pendency of a civil action wherein the validity of the transaction presentation of the judicial order required by Article 1607 of the Civil necessary to effectuate consignation, tender of pay-ment being
as a sale with right to repurchase was raised, and the court finally Code of the Phil-ippines, the Register of Deeds shall make the sufficient.
rendered a judgment upholding the validity of the transaction as corresponding note of consolidation, cancel the certificate of title of However, a vendor a retro to be entitled to exercise his right
such, may the vendor still exercise the right to redeem, the period the vendor, and issue in lieu thereof a transfer certificate of title in the of redemption must reimburse the vendee a retro not only the
therefor having expired? The answer should be in the affirmative; name of the vendee as the owner in fee simple of the property. price of sale, but also the expenses of the contract and any other
that is, the vendor may still exercise the right to repurchase within legitimate payments made by reason of the sale, and the
thirty days from the time the judgment becomes final. The petition to consolidate ownership as required by law does necessary and useful expenses made on the thing sold. He has
not partake of the nature of a motion which is merely an incident to no option to require the vendee a retro to remove the useful
Period when to commence. an action or a special proceeding, but is an ordinary civil action improvements on the land subject of the sale a retro. Until he
cognizable by the court and governed by the rules on summons, and shall have reimbursed the vendee a retro of such expenses, the
Where a sale of registered land was executed subject to the the courts failure to observe these rules renders its consequent judg- latter may retain possession of the property.
right of repurchase within a definite period, and the deed was not ment and/or orders open to attack even on jurisdictional ground. 81
immedi-ately registered until after the expiration of the period, the And where the vendor a retro is already dead and the land was Sale under pacto de retro when not convertible into
problem that may arise is: When should the period to repurchase conjugal property, the surviving widow and heirs of the deceased are mort-gage.
commence? Is it from the time of the execution of the sale under indis-pensable parties inasmuch as they have become the co-owners
pacto de retro, or from the date of registration thereof in the of the right to repurchase by operation of law.82 A contract of pacto de retro by a public document, although
Registry of Deeds? there appear therein the words This sale is a mortgage, if we fail
Under the new Rules of Court petition to consolidate ownership to redeem the same, is not affected by such words, which do not
Applying Section 51 of P.D. No. 1529, which provides that the may now be filed as a special civil action such as seeking a alter the true character of the contract as disclosed by the
act of registration shall be the operative act to convey and affect declaratory relief or similar remedy.83 This does not apply, however, to agreement, showing that the parties intended to execute a
the land, one may be led to conclude that the period to repurchase contract of sale under pacto de retro executed before the New Civil contract of pacto de retro.90 The reason for this is that by
should be computed from the date the deed of sale was registered. Code took ef-fect. To impose the additional condition found in Article operation of law, upon the failure of the vendor a retro to
It was held, however, that such period should be reckoned not from 1607 thereof would impair and diminish rights vested under the old exercise his right of redemption, the vendee irrevocably acquires
the date of the registration of the deed but from the date of its Code.84 the absolute ownership of the thing sold, and the parties to a
execution inas-much as the owner is neither prohibited nor contract cannot validly agree otherwise to contravene the
precluded by law from binding himself to an agreement whereby his Where the court held that a sale under pacto de retro was an operation of law.
right of repurchase is for a period starting from the date of equitable mortgage and consequently the petition to consolidate
execution of the deed. Section 51 of P.D. No. 1529 provides that, ownership had to be dismissed, such judgment in itself does not Right of legal redemption or pre-emption.
even without the act of registration, a deed purporting to convey or constitute an adjudication of the right to foreclose the mortgage or to
affect registered land shall operate as a contract between the collect the indebtedness, but only gives rise to such right unless in The right of redemption which means the right to
parties. The registration is intended to protect the buyer against the petition for consolidation there was an alternative prayer to that repurchase or buy back, as well as that of pre-emption which is
claims of third persons arising from subsequent alienations by the effect. However, the failure to make such alternative prayer cannot be the right to pur-chase in preference to others, as reserved in
vendor, and is certainly not necessary to give ef-fect, as between considered as a bar to collecting the indebtedness in a proper action favor of a co-owner or an adjacent owner, is governed by Articles
the parties, to their deed of sale. 80 In short, the rule is that, for that purpose.85 1619 to 1623 of the New Civil Code. Such right may be exercised
although a transaction affecting registered land has not been not only after the consummation of the sale but even before, the
registered in the Registry of Deeds nor annotated on the Torrens Right of vendor a retro. period of thirty days made available therefor being set to
title covering it, the technical deficiency will not render the commence from the date of written notice by the vendor or
transaction ineffective as such, but simply will render it ineffective The sole right of the vendor under a pacto de retro sale is that of prospective vendor, as the case may be. And to insure that one
as against third persons. redemption. He has no other interest left in the property which he can entitled to such right has been given the proper opportunity,
transfer.86 When a vendor a retro dies leaving several heirs, each heir Article 1623 of the Civil Code expressly prohibits the registration
Consolidation of ownership in pacto de retro sale. can only repurchase or redeem such part or share in the property of the deed of sale, unless accompanied with an affidavit of the
which he has or may have acquired as inheritance. 87 vendor showing that he has given the required written notice to
Upon the expiration of the period agreed upon by and all possible redemptioners.
between the vendor and the vendee in a pacto de retro sale, the For the purpose of redemption, where the vendee a retro should
vendee may execute an affidavit of consolidation of ownership, refuse payment tendered him, it is not necessary for the vendor a It may be stated, however, in this connection, that the
setting forth, among other things, that the period within which the retro to resort to consignation of such payment to the court. affidavit requirement does not apply to transactions which took
19
effect prior to the effectivity of the New Civil Code. 91 Neither does it Rural means pertaining to the country as distinguished from a
apply to a case where the deed sought to be registered contains a city or town, and the word is derived from the Latin rus, ruris, the
recital of the fact that the required written notice has previously country. The word urban is defined as of, or belonging to, a city or
been given by the vendor to all possible redemptioners, for by such town and is derived from the Latin urbanis which in that language
recital of the fact in the deed itself it is not made less effective than imports same meaning This Latin word is derived in turn from urbs,
if it were done by means of a separate affidavit. 92 So, also, the urbis, a city.96 And rural property is to be determined from the
furnishing of a copy of the deed of sale is equivalent to the giving character of the locality, the streets, lots, buildings, improvements,
of written notice required by law, and the 30-day period for the and the market value of the property, as also of the neighboring and
legal redemption begins to run from the date of receipt of said deed surrounding properties. Whether a particular property is to be
of sale.93 considered rural or city depends largely upon its surrounding and the
character of the property in the neighborhood. If the buildings and
When to apply to rural land only. improvements in the neighborhood are few and scattered, if they
partake of the character of the country, rather than of the city or
As provided by Article 1621 of the Civil Code, the right of town, and are occupied by persons engaged in rural pursuits, the
redemption is available to the owners of the adjoining lands when locality should be considered rural. 97 An urban property is further
the land alienated is rural and its area does not exceed one distinguished from rural in that the former is situated in a city or a
hectare. However, this right cannot be invoked where the grantee town resembling a city, while rural estate is that located in the
does not own any rural land. Also, where two or more adjoining country, in an agricultural district. 98
owners are entitled to the same right, the owner of the smaller
area is to be pre-ferred, and if both adjoining lands have the same Consistent with the legislative objective, the use of the land for
area, the one who first requested the redemption is given the agricultural purposes is essential in order that the same may be
priority. characterized as rural land that is subject to legal redemption under
Article 1621 of the Civil Code. Where the qualification is doubtful, the
For the purpose of the exercise of such right between adjacent consideration of not only the use and destination of the land but also
owners, both the land of the one exercising the right of redemption the customs of the town had to be taken into account in order to
and the adjacent property sought to be redeemed must be rural. If properly determine such cases.99 The small parcel of land, one hectare
either is, or both are, urban there is no right of redemption. 94 or less in area, must be dedicated to agriculture before the adjoining
owners may claim a right of legal redemption.
Incidentally, it may be mentioned here that under Section 13
of Republic Act No. 3844, otherwise known as the Agricultural Land Thus, it was held that it is urban land by its purpose or being
Reform Code, no deed of sale of agricultural land under cultivation used for agricultural, fishing, or timber exploitation, as distinguished
by an agricultural lessee or lessees shall be recorded in the Registry from dwelling, industry or commerce. Accordingly, where the land is
of Deeds unless accompanied with an affidavit of the vendor that principally used for residential, rather than for agricultural purposes,
he has served written notice on all lessees to be affected to enable it certainly cannot legally be classified as rural land.
them to exercise their right of pre-emption within 180 days, or that oOo
the land is not worked by an agricultural lessee.

When to apply to urban land.

The right of legal redemption or pre-emption which was made


available under the Spanish Civil Code to rural land only has now
been extended by the New Civil Code to urban land where this is so
small and so situated as to make a major portion thereof of no
practical purpose within a reasonable time, the same having been
bought merely for speculation. Such right is granted to the owner
of the adjoining land at a reasonable price. But where there are two
or more owners of adjoining lands, the owner whose intended use
of the land in question appears best justified shall be preferred in
the exercise of the right of pre-emption or redemption. 95

Rural land and urban land, distinguished.

20
Chapter X the owners of separate condominium units, no unit therein can be following plans appended to the master deed as integral parts
CONDOMINIUM conveyed or transferred except only to Filipino citizens or corporations thereof; (a) survey plan of the land included in the project,
at least 60% of the capital of which belongs to Filipino citizens. And unless such survey plan had previously been filed in the office;
Condominium, concept. where such common areas in a condominium project are held by a (b) a floor plan of the building or buildings in the project in
corpora-tion, no transfer or conveyance of a unit therein shall be sufficient details to identify each unit, its relative location and
Condominium or condominia, in civil law, generally means co- valid, if the concomitant transfer of the appurtenant membership or approximate dimensions; and (8) any reasonable restrictions not
ownerships or limited ownerships. For the purposes, however, of stockholding in the corporation will cause the alien interests in such contrary to law, morals or public policy regarding the rights of
Republic Act No. 4726, otherwise known as the Condominium Act, corporation to exceed 40%. any condominium owner to alienate or dispose of his
a condominium implies both co-ownership and limited ownership, it condominium.
being defined as ownership of an interest in real property consisting However, a corporation, even if 100% of its capital be owned by
of: (1) a separate part of unit in a residential, industrial or foreigners, may set up a condominium corporation if the land on Registration of restrictions.
commercial building; (2) an undivided common interest, directly or which the building is erected is held only under lease. Thus, where
indirectly, in the land on which the building is erected; and (3) a such a foreign condominium corporation does not own the land on Before any condominium unit may be sold or conveyed, it is
similar interest in other common areas of the building itself. A which the condominium project is situated, Republic Act 4726 allows a prerequisite that a declaration of restrictions relating to the
condominium may cover a separate unit or part of the entire multi- the transfer to alien of an interest in a unit in the said condominium, project be registered, which restrictions constitute a lien that
unit project, which may be owned separately by a person who also without including ownership in the common areas of the land under shall be binding upon all condominium owners, subject to be
owns interest, jointly with others, in designated common areas of lease. enforced by the owner of the project or its management body.
the land and the building itself. These restrictions are recorded by way of annotation on the
A qualified corporation may buy a condominium unit, store or corresponding certificate of title.
Membership or shareholding in condominium corporation. apartment, including the undivided part ownership and/or co-
ownership over the common areas of the land on which the building is According to Section 9 of Republic Act 4726, such
When a title to a condominium is held by a corporation erected, provided that the Filipino interests in the total capital of the declaration of restrictions may provide, among other things, as
specially formed for the purpose, the holders of separate units or buying corporation shall remain at least 60% at all times. follows:
interests in the project are automatically members or shareholders
of the corpo-ration.1 Registration of enabling or master deed. As to the management body: (a) for the powers thereof,
including the power to enforce restrictions; (b) for the
However, a purchaser of a condominium unit in the It is a legal prerequisite in order that a condominium project maintenance of insurance policies, insuring condominium
condomini-um project who has not fully paid the purchase price may come under the operation of the Condominium Act that the own-ers against loss by fire, casualty, liability, and other
thereof does not automatically become a shareholder or member of enabling or master deed of the project be registered in the office of insurable risks, and for the bonding of the members of the
the Condominium Corporation. The share of stock appurtenant to the Register of Deeds concerned and annotated on the corresponding management body; (c) for the maintenance, utility,
the unit will be trans-ferred accordingly to the purchaser of the unit certificate of title. In case of amendment or revocation of such master gardening, and other services benefiting the common areas,
only upon full payment of the purchase price at which time he will deed, the necessary instrument executed by the registered owner or including the employ-ment of personnel necessary for the
also become the owner of the unit. Pursuant to Section 10 of R.A. owners with the concurrence of all the registered holders of any en- operation of the build-ing, as well as legal, accounting, and
4726, ownership of a unit is a condition sine qua non to being a cumbrance on the land and/or building or portion thereof need also be other professional and technical services; (d) for the
shareholder in the condominium corporation. It follows that a registered. Until the revocation is so registered, the provisions of the purchase of materials, supplies, and other things needed by
purchaser of a unit who is not yet the owner thereof for not having Condominium Act shall continue to apply to such property. the common areas; (e) for the payment of taxes and special
fully paid the full purchase price, is not a shareholder. By necessary assessments which constitute a lien upon the entire project
implication, the separate interest in a condominium which entitled The enabling or master deed shall contain, among other things, or common areas, and for the discharge of any lien or
the holder to become automatically a shareholder in the the following: (1) description of the land; (2) description of the build- encumbrance levied against the en-tire project or the
condominium corporation, as provided in Sec-tion 2 of the ing or buildings, stating the number of stories and basements, the common areas; (f) for the reconstruction of any portion or
Condominium Act, can be no other than ownership of a unit. This is number of units and their accessories, if any; (3) description of the portions of the project that may suffer damage or
so because nobody can be a shareholder unless he is the owner of common areas and facilities; (4) statement of the exact nature of the destruction; (g) for the manner of delegation of the power
a unit and when he ceases to be the owner, he also ceases interest acquired or to be acquired by the purchaser in the separate of the management body; (h) for the entry by its officers
automatically to be a shareholder.2 units and in the common areas of the condominium project, and and agents into any unit when necessary in connection with
where title to or the appurtenant interests in the common areas are the maintenance or construction for which such body is
Ownership of condominium project. or is to be held by a condominium corporation, a statement to that respon-sible; and (i) for a power of attorney to the
effect shall be included; (5) statement of the purposes for which the management body to sell the entire project for the benefit
Where condominium project covers the building and the land building or buildings and each of the units are intended or restricted of all the owners thereof, when partition of the project may
on which it is erected, acquisition of ownership thereof is limited as to use; (6) a certificate of the registered owner of the property, if be authorized under the law, which said power may be
only to those qualified to acquire or hold lands of the public he is other than those executing the master deed, as well as of all binding upon all of the condominium owners regardless of
domain. Thus, under Section 5 of the Condominium Act, where the registered holders of any liens or encumbrances on the property whether they assume the obligations of the restrictions or
common areas in land in the condominium project are owned by indicating their consent to the registration of the deed; (7) the not;
21
Unless otherwise provided in the declaration of restrictions, each of title, and not on the certificate of title covering the entire
For the manner and procedure for amending such restrictions: condominium unit shall be assessed separately for its share to meet condo-minium property.
Provided, That the vote of not less than a majority of the reasonable and authorized expenditures in proportion to its owners
interests of the owners is obtained; fractional interest in any common areas. Such assessment shall be an In case, however, where a condominium project covers land
obligation of the owner thereof at the time of assessment is made. registered under Act 3344 (now Section 113 of P.D No. 1529),
For independent audit of the accounts of the manage-ment body; The amount of any assessment plus any other charges thereof, such the reg-istration of a conveyance of a condominium shall be
as interest, costs (including attorneys fees) are penalties and shall be deemed sufficient if the Register of Deeds retains the original or
For reasonable assessments to meet authorized ex-penditures, a lien upon the condominium assessed. signed copy of the deed filed with him, together with the
each condominium unit to be assessed separately for its share certificate of the management body of the project, and returns a
of such expenses in proportion (unless otherwise provided) to The management body may cause a notice of such lien to be copy of the deed to the condominium owner duly acknowledged
its owners fractional interest in any common areas; registered with the Register of Deeds of the city or province where and stamped to indicate the registration thereof in his office.
such condominium project is located. The notice shall state the
For the subordination of the liens securing such assessments to amount of such assessment and such other charges thereon as may Additional requirements.
other liens either generally or specifically described; and be authorized by the declaration of restrictions, a description of the
condominium unit against which has been assessed, and the name of Under the provision of Presidential Decree No. 957 issued
For conditions, other than those provided for in Secs. 8 and 13 of the registered owner thereof. Such notice shall be signed by an July 12, 1976, it is required that a condominium project be
the Condominium Act, upon which partition of the project and authorized representative of the management body or as otherwise registered with the National Housing Authority by filing therewith
dissolution of the condominium corporation may be made. provided in the declaration of restrictions. Upon payment of said as- a sworn registration statement in the form prescribed. The
Such right to partition or dissolution may be conditioned upon sessment and charges or other satisfaction thereof, the management project, together with the plans of the buildings prepared in
failure of the condominium owners to rebuild within a cer-tain body shall cause to be registered a release of the lien. 3 accordance with the National Building Code, is to be submitted to
period, or upon specified inadequacy of insurance proceeds, or the Housing Author-ity for approval. All contracts to sell, deeds of
upon specified percentage of damage to the building, or upon Enforcement of such lien. sale and other similar instruments relative to the sale or
a decision of an arbitrator, or upon any other reasonable conveyance of condominium units, whether or not the purchase
condi-tion. Assessment lien that has been duly registered with the Register price is paid in full, are also required to be registered by the
of Deeds concerned may be enforced in the same manner provided seller in the Office of the Register of Deeds of the province or city
Registration of sale or conveyance of condominium. for by law for the judicial or extrajudicial foreclosure of mortgages of where the property is situated. The owner or developer may not
real property. The condominium owner shall have the same right of also mortgage any unit without the prior written approval of the
Upon registration of sale or conveyance of a condominium unit redemption as in cases of judicial or extrajudicial foreclosure of Authority and, if approved, the mortgage loan shall be used for
mortagages.4 the development of the condominium project and effective
with the common areas and facilities thereunto appertaining, the measure are to be provided to ensure such utilization.
conveyance is annotated on the corresponding certificate of title Real estate taxes on condominium. oOo
and thereupon the transferee is issued a condominium owners
copy of the pertinent portion of such certificate of title, without Each condominium separately owned shall be separately as-
reproduc-ing thereon the ownership status of the other sessed, for purposes of real property taxation and other tax purposes,
condominium units in the project. In case of subsequent to the owners thereof and tax on each such condominium shall con-
conveyance of the same unit, the registration thereon cannot be stitute a lien solely thereon.5
given course unless accompanied with a certificate from the
management body to the effect that the conveyance is in Registration of subsequent dealings.
accordance with the provisions of the declaration of restrictions
previously made of record. A subsequent sale, conveyance or transfer of a condominium
unit may be registered in a similar manner as the initial sale,
Where, however, the enabling or master deed provides that conveyance or transfer; that is, by way of annotation on the
the land included in the project is to be owned in common by the corresponding cer-tificate of title, followed by the issuance of a
condo-minium owners therein, the Register of Deeds may, at the condominium certificate of title, copy of which is delivered to the
request of all the condominium owners and upon surrender of all transferee. Of course, the preexisting condominium certificate of title,
their condo-minium owners copies, cancel the certificate of title of if any, of the grantor is to be cancelled and in lieu thereof a new
the property and issue a new one in the name of said condominium condominium certificate is issued, copy of which is delivered to the
owners as pro indiviso co-owners thereof. new owner.

Assessment as lien. Mortgages and all other dealings short of transfer of ownership
may be registered only by annotation on the condominium certificate

22
Chapter XI A legal mortgage is one created by operation of law, wherein the Office of the Registry of Deeds concerned. Failure to register,
REAL ESTATE MORTGAGE creditor is given a mortgage on the property of his debtor, without the accord-ing to the same article, does not necessarily invalidate
necessity of the parties actually stipulating for it. It may also be the mortgage, but limits its binding effect to the parties thereto
Mortgage, nature and meaning. defined as one required by express provision of law to be executed in only. It is also of the essence of the contract of mortgage that
favor of certain persons to secure the performance of a principal ob- when the principal obligation becomes due, the property
A mortgage, according to Sanchez Roman, is a real right con- ligation. For instance, claims of laborers engaged in the construction mortgaged cannot be appropriated by the creditor, but must be
stituted to secure an obligation upon real property or rights therein of a building are to be considered as mortgages upon said building by sold at public auction in accordance with the procedure
to satisfy with the proceeds of the sale thereof such obligation operation of Article 2243, in relation to Article 2242, of the new Civil prescribed by law for the satisfaction of the obligation.
when the same becomes due and has not been paid or fulfilled. Code.
Mortgagee in bad faith.
By statutory definition under the Civil Code of California, a A judicial mortgage is one resulting from a judgment. For in-
mortgage is a contract by which specific property is hypothecated stance, a plain deed of sale may be declared to be a mortgage by a At the time of the constitution of the mortgage, the
for the performance of an act, without the necessity of a change of competent court. mortgagee-bank failed to conduct an ocular inspection. It was
possession. already aware that there was an adverse claim and notice of lis
An equitable mortgage is one that is not a mortgage in form but pendens annotated on the Certificate of Title. The question is
The Civil Code of Louisiana defines a mortgage as a right in substance a mere security for a debt or obligation. This commonly whether it is a mortgagee in good faith or in bad faith.
granted to the creditor over the property of the debtor for the occurs in the case of pacto de retro sales.
security of his debt, and gives him the power of having the The bank is not a mortgagee in good faith. (DBP vs. CA,
property seized and sold in default of payment. Laws governing mortgage in general. 331 SCRA 267). It was said that the due diligence required of
banks extend even to persons regularly engaged in the business
From the foregoing definitions, it will be observed that Contract of real estate mortgage in general is governed by Ar- of lending money secured by real estate mortgages. (Adriano vs.
mortgage is regarded as a mere lien, and not as creating a title or ticles 2085 to 2092 and 2124 to 2131 of the Civil Code of the Philip- Pangilinan, G.R. No. 13747, Jan. 16, 2002). Judicial notice is
estate. It is in essence a charge on property for the purpose of pines. taken of the standard practice for banks before they approve the
security. Stated otherwise, a mortgage is an accessory undertaking loan to send representa-tives to the premises to investigate the
for the conven-ience and security of the mortgage creditor, and As to foreclosure of mortgages, Rule 68 of the Rules of Court collateral offered and the ownership thereof. (DBP vs. CA, supra.)
exists independently of the obligation to pay the debt secured by it. governs the procedure in judicial foreclosures, while Act No. 3135, as It should not simply rely on the face of the Certificate of Title to
The mortgagee can waive the mortgage security and proceed to amended by Act No. 4118, governs extrajudicial foreclosure. the property as its ancillary func-tion of investing funds required
collect the principal debt by personal action against the original a greater degree of diligence. (GSIS vs. CA, 287 SCRA 204).
mortgagor.1 As to aliens becoming mortgagees, the pertinent law is Republic Considering the substantial loan involved, it should exercise more
Act No. 133, approved in 1947, as superseded by Republic Act 4381, caution. (GSIS vs. CA, supra.) Thus, a person who deliberately
The common-law theory of a mortgage is that the title of the and later by Republic Act 4882, approved June 17, 1967. ignores a significant fact that would create suspicion in an
mortgagor passes to the mortgagee, subject to reversion upon the otherwise reasonable person is not an innocent purchaser for
performance of the condition subsequent. In the Philippines, Essential requisites of mortgage. value (DBP vs. CA, supra.).
however, we do not adopt the common law theory, for here the
owner who constitutes a mortgage retains title to the property and According to Article 2085 of the Civil Code of the Philippines, the The mortgagee was already aware that there was an
does not lose his attributes as an owner. He only creates a lien or essential requisites of a mortgage are: adverse claim and notice of lis pendens annotated on the title
encumbrance upon his property. when it reg-istered the mortgage. Unless duly registered, a
That it be constituted to secure the fulfillment of a principal mortgage does not affect third parties. (Sec. 51, P.D. 1529). The
He who constitutes a mortgage is called mortgagor and he obligation; law, Sec. 51, P.D. 1529, states:
in whose favor a mortgage is constituted is called mortgagee.
That the mortgagor be the absolute owner of the thing mortgaged; Sec. 51. Conveyance and other dealings by registered
Kinds of mortgages. owner An owner of registered land may convey,
That the person constituting the mortgage has the free disposal of mortgage, lease, charge or otherwise deal with the same in
There are various kinds of mortgages, but the most common the property, and in the absence thereof, that he be legally accordance with existing laws. He may use such forms of
of them are: (a) conventional or voluntary mortgage; (b) legal authorized for the purpose. deeds, mortgages, leases or other voluntary instruments as
mortgage; are sufficient in law. But no deed, mortgage, lease, or other
A third person who is not a debtor or party to the principal voluntary instrument except a will, purporting to convey or
(c) judicial mortgage; and (d) equitable mortgage. obligation may secure the latter by mortgaging his own property. affect registered land, shall take effect as a conveyance or
bind the land, but shall operate only as a contract between
A conventional or voluntary mortgage is one created by agree- As a further requisite, Article 2125 of our Civil Code provides the parties and as evidence of authority to the clerk or
ment of the parties. that it is indispensable, in order that a mortgage may be validly con- register of deeds to make registration.
stituted, that the document in which it appears be registered in the
23
The act of registration shall be the operative act to person who mortgages it. In this case, since the one who mortgaged The validity and fulfillment of contracts cannot be left to the will
convey and affect the land, and in all cases under this Act the it was not the owner, the mortgage is void. of one of the contracting parties.2
registra-tion shall be made in the office of the register of
deeds of the province or city, where the land lies. The principle of innocent mortgagee for value is not applicable The above doctrine applies particularly to land previously
here, such principle contemplates cases involving individuals who by regis-tered under the Torrens system. Where the land involved,
True, registration is not the operative act for a mortgage to be their negligence enabled other persons to cause the cancellation of however, has not been registered under said system and the
binding between the parties. But to third persons, it is indispensa- the original TCT and the issuance of a new one in their favor. Hav-ing mortgage is sought to be recorded under Act No. 3344, it is
ble. (Art. 2125, NCC). Settled in this jurisdiction is the doctrine that obtained the new TCT, they conveyed the said property by way of expressly required that the parties have agreed to register said
a prior registration of a lien creates a preference. (Lavides vs. Pre, mortgage to third persons who are innocent mortgages for value. In instrument under the provisions of this Act. In other words, the
G.R. No. 127830, Oct. 17, 2001). Even a subsequent registration of these cases, the mortgagors were the registered owners of the mortgagee cannot record such mort-gage of unregistered land
the prior mortgage will not diminish this preference, which property; whereas in this case, the mortgagor was an impostor, not over the objection of the mortgagor.
retroacts to the date of the annotation of the notice of lis pendens the registered owner.
and the ad-verse claim. (Lavides vs. Pre, supra.). Thus, the Special characteristics of real mortgage.
mortgagees failure to register the real estate mortgage prior to Besides, the mortgagee was not innocent mortgagee for value
these annotations, resulted in the mortgage being binding only because he failed to observe the due diligence in the grant of the loan The following are the special characteristics of a real mort-
between it and the mortgagor. Third parties to the mortgage are and in the execution of the mortgage. Tito has been engaged in the gage:
not bound by it. (Ramos vs. CA, 302 SCRA 589). real estate business particularly in mortgage financing for almost
seven years. As such he is expected to ascertain the status and condi- Realty as subject matter: Only real property or alienable
Who may constitute a mortgage. tion of the property offered to him as collateral as well as to verify the rights and interests therein may be the subject mat-ter of a
identify of the person he transacts business with. He cannot simply mortgage. Thus, not only the land and improvements
It is only the absolute owner of the property who can rely on a hasty examination of the property offered as security and thereon may be mortgaged, but also the credits or rights of
constitute a valid mortgage on it. (Art. 2085, NCC). In case of the documents backing it up. The ocular inspection the mortgagee the mortgagee or other encumbrancers.
foreclosure, a sale would result in the transmission only of conducted was primarily intended to appraise the property. He did not
whatever rights the seller had over the thing sold. (Art. 1458, NCC; verify whether the mortgagor was really the owner of the prop-erty Real right: A mortgage lien is a real right and as such it is
Nufable vs. Nufable, 309 SCRA 692). sought to be mortgaged. Furthermore he was informed that the good and binding against the whole world, and may be
property was being leased. So he should have made inquiries about enforced by real action against all persons who may have
If the property is sold twice but the sales contract were simu- the rights of the actual possessors and verified from them whether existing rights or interests in the same property, not
lated, they are null and void. (Francisco vs. Francisco-Alfonso, G.R. the claimed owner was, indeed, their lessor. On the other hand, registered prior to the mortgage. It was held that even if
No. 138774, Mar. 8, 2001). Thus, they did not convey any rights Jimmys act of entrusting the TCT and his Residence Certificate to personal action on the debt secured has prescribed, a suit
that could ripen into valid titles. (Velasquez vs. CA, 345 SCRA 468). Anita was only for helping him to find a money lender. Not having to enforce the mortgage may still lie so long all such debt
Nec-essarily, the subsequent real estate mortgage constituted in executed a Special Power of Attorney in her favor, he clearly did not has not yet been paid.
favor of another was also null and void, because the mortgagor was authorize her to be his agent in procuring the mortgage. Given the
not the owner thereof. There being no valid real estate mortgage, particular circumstances of this case, the negligence of the owner is Accessory obligation: As an obligation, a
there could also be no valid foreclosure or valid auction sale. At not enough to offset the fault of the mortgagee in granting the loan. mortgage is only accessory and presupposes the existence of a
bottom, the mort-gage cannot be considered either as mortgagee The failure of the mortgagee to verify essential facts was the principal obligation. In the absence therefore of a principal
or as a purchaser in good faith. (Cruz, et al. vs. Bancom Finance immediate cause of his predicament. In any event, the mortgagee is obligation, a mortgage cannot stand.
Corp., G.R. No. 147788, Mar. 19, 2002). not precluded from going after his relative and her cohorts.
Indivisibility: Even though the debt secured may be
Who is mortgagee in good faith. Consent of both parties not necessary to registration of divided among the debtors or the creditors or their successors in
mortgage. interest, the mortgage shall remain as one and indivisible, unless
In Adriano vs. Pangilinan, G.R. No. 137471, Jan. 16, 2002, the there have been several things given in mortgage and each of
owner of a real property covered by a title entrusted it to another, a A mortgage may be registered at the instance of the mortgagee them guarantees only a determinate portion of the ob-ligation. 4
distant relative, for the other to look for a financier as he was in alone, even over the objection of the mortgagor. The reasoning of a
need of money. The relative tried to look for one and it resulted in a register of deeds that inasmuch as a mortgage is a voluntary trans- However, the mere embodiment of the real estate and the
situation where there was an impostor who pretended as owner of action, he had no authority to register it without the consent of both chattel mortgage in one single document does not fuse both
the property when the financier inspected the same. The signature parties, is fallacious. He confuses the execution of a mortgage with its securities into an indivisible whole. Both remain distinct agree-
of the owner was forged in the contract of mortgage. registration. It is the execution of the mortgage that is volun-tary. ments, differing not only in the subject matter of the contract but
Once a mortgage has been signed in due form, the mortgagee is also in the governing legal provisions. Consequently, the
In holding the mortgage void, the Supreme Court said that entitled to its registration as a matter of right. By executing the mortgagee has every right to foreclose the real estate mortgage,
one of the essential requisites of a valid mortgage under Article mortgage, the mortgagor is understood to have given his consent to and waive the chattel mortgage and maintain instead a personal
2085 of the Civil Code is that the thing mortgaged be owned by the its registration, and he cannot be permitted to revoke it unilaterally. action for the recovery of the unpaid balance of the obligation
secured.5
24
of redemption, it was held that, all the facts taken together, it only giving away his property, tries to get, as compensation, its real
Inseparability: The mortgage lien and the property affected confirms the real intention of the parties to secure the payment of the value.13
are inseparable, so much so that whoever may subse-quently loan with the land as security. Stated otherwise, the transaction is
acquire title to the mortgaged property is bound by the terms of deemed to be an equitable mortgage.10 Mortgage compared with antichresis.
the mortgage, whether the transfer be with or without the consent
of the mortgagee. In other words, the mortgage, until discharged, However, for the purpose of determining whether a contract is As to possession of the property given in security, the
follows the property to whomever it may be transferred no matter truly a sale under pacto de retro or an equitable mortgage, the Civil debtor retains it in the case of a mortgage; whereas, the creditor
how many times over it changes hands as long as the annotation is Code of the Philippines has provided a number of tests embodied in takes over in the case of antichresis. Thus, a mortgage, coupled
carried over.6 the following article: with delivery of possession of the land to the creditor, becomes
antichresis,14
Retention of possession. The mortgagor generally retains Art. 1602. The contract shall be presumed to be an equi-
possession of the mortgaged property inasmuch as a mortgage is a table mortgage, in any of the following cases: (b) With respect to the fruits, in a mortgage the creditor does not
mere lien and title to the property does not pass to the mortgagee. gather or receive them whereas, in antichresis the creditor
When the price of a sale with right to repurchase is usually gener-ally receives them with the obligation to apply the value
Pacto de retro sale when considered an equitable mort- inadequate; thereof or proceeds therefrom to the payment of interest due,
gage. and, if any still remaining, to the principal obligation. (c) In
When the vendor remains in possession as lessee or antichresis the creditor is obliged to pay for the taxes and
Under the doctrine in a leading case, 7 where a contract of sale otherwise; charges upon the estate; whereas, in mortgage it is the debtor.
with pacto de retro is executed as security for a debt owing by the
grantor from the grantee, such conveyance must be treated in When upon or after the expiration of the right to repurchase another In this connection, it may be stated by way of observation
equity substantially as a mortgage, that is, creating a mere instrument extending the period of redemp-tion or granting a that out in the provinces we have in practice a peculiar form of
equitable charge in favor of the creditor or person named as new period is executed; mortgage which can easily be mistaken for antichresis. It is a
purchaser therein; and the fact that the conveyance was executed sort of a mortgage subject to usufruct whereby the debtor
for this purpose may be shown by oral evidence apart from the When the purchaser retains for himself a part of the purchase price; transfers to the creditor the possession of the land given as
instrument of conveyance. The equitable doctrine that any security with the conditions, among other things, that the capital
conveyance intended as security for a debt will be held in effect to When the vendor binds himself to pay the taxes on the thing sold; or loan shall not bear interest but in lieu thereof the creditor shall
be a mortgage, whether actually so expressed in the instrument or have the right to have the land cultivated and the products
not, operates regardless of the form of the agreement chosen by In any other case where it may be fairly inferred that the real thereof shall belong to the creditor exclusively, which right of
the contracting parties as repository of their obligations. Equity intention of the parties is that the transaction shall secure the usufruct shall pertain to him as long as the mortgage is in full
looks through the form and considers the substance; and no kind of payment of a debt or the performance of any other obligation. force and effect. As held by the Court of Appeals in a cer-tain
engagement can be devised which will enable the purchaser to case,15 such contract is one of mortgage with usufruct and not of
evade the effects of the doctrine to which reference is made. 8 In any of the foregoing cases, any money, fruits, or other benefit antichresis, citing an earlier authority, which finds recent
to be received by the vendee as rent or otherwise shall be considered corrobora-tion, stating thus: When a contract of loan with
as interest which shall be subject to the usury laws. security does not stipulate the payment of interest but provides
Similarly, in a case where a certain real property was sold and for the delivery to the creditor by the debtor of the real property
immediately thereafter the purchaser sold the same property under In case there should be a doubt as to whether the contract in constituted as security for the payment thereof, in order that the
pacto de retro for the same price representing the amount of loan question is one of sale with right to repurchase or an equitable mort- creditor may administer the same and avail himself of its fruits,
advanced by the vendee a retro, with the further condition that the gage, Article 1603 of the Civil Code of the Philippines resolves it in without stating that said fruits are to be applied to the payment
repurchase price shall escalate month after month, it was held that favor of the latter. So much so that where the repurchase price as of interest, if any, and afterwards to that of the principal of the
the latter transaction could not have been a sale under pacto de stipulated is subject to 12% interest per annum, the transaction was credit, the contract shall be considered to be one of mortgage
retro but presumed to be an equitable mortgage as contemplated held to be an equitable mortgage.11 and not of antichresis.16
by Article 1602 of the Civil Code.9
On the question of whether or not the price of a sale under But whether the contract be treated as a mortgage with
So, also, where the mortgage had become overdue, and pacto de retro is unusually inadequate, the law apparently leaves usufruct or as an antichresis, it would seem that the creditor just
before its foreclosure the mortgagor executed an absolute sale the an-swer to depend on existing conditions. Accordingly, where land the same cannot be entitled to a return, in lieu of interest, of
covering the mortgaged property in favor of the mortgagee, but at which reasonably cost P1,280.00 was sold for only P250.00 in more than that allowed under the usury law. As a mortgage,
the same time the mortgagee in a separate instrument granted the Japanese fiat money, it was held that the price was unusually under Article 1602 of the new Civil Code, any money, fruits or
mortgagor an option to repurchase within a certain period, it was inadequate.12 Mere inadequacy is not sufficient. Thus, in a certain other benefit received by the creditor shall be considered as
noted that some doubt could have existed as to the real intention of case inadequacy of price was not considered sufficient ground for interest which shall be subject to the usury law. And as an
the par-ties. But after considering the added fact that the annulling the con-tract, it being a common practice to fix a relatively antichresis, under Article 2138 of the same Code the interest
mortgagor, later turned seller, remained in actual possession of the reduced price to afford the vendor a retro every facility to redeem the upon the debt may be compensated with the fruits of the
land and enjoyed the fruits thereof pending expiration of the period land, unlike in an absolute sale where the vendor, in permanently property but if the value thereof should exceed the amount of
25
interest allowed by the usury law the excess shall be applied to the mortgagee by any form of deed or instrument sufficient in law for the What a married woman may mortgage without marital
principal; hence, unless so applied to the principal, there would purpose. But such mortgage deed, and all instruments assigning, consent.
seem to be usury. extending, discharging, and otherwise dealing with the mortgage,
shall be registered, and shall take effect upon the title only from the A married woman, of legal age, may mortgage her
Real mortgage compared with chattel mortgage. time of registration. paraphernal property without the permission of her husband. 17

The principal difference is self-evident by what their respective As to when such deeds are executed in a form sufficient in law, So, also, under the system of complete separation of
names imply. Real mortgage covers real property or real rights for Section 127 of Act No. 496, as amended by Sec. 112 of P.D. No. property of the spouses, the wife may dispose of or mortgage
its subject matter; whereas, chattel mortgage covers only chattels 1529, provides that it shall be sufficient when made substantially in her separate estate, without the consent of her husband,
or personal property. Another difference is in the formality required ac-cordance with the forms prescribed therein, signed by the person including what she may accumulate from her profession,
for their constitution. While real mortgage is required to be or persons executing the same, in the presence of two witnesses, who business, or industry.18
constituted by means of a public instrument, chattel mortgage may shall sign the instrument as witnesses to the execution thereof, and
be constituted in a private document only, provided the latter be shall be acknowledged to be his or their free act and deed before a With respect to conjugal property, she may mortgage such
accompanied with an affidavit of good faith. notary public or other public officer authorized by law to take ac- prop-erty only in case the administration thereof has been
knowledgment. transferred to her by the court (a) when she becomes the
In the foreclosure of real estate mortgage, right of redemption guardian of her husband,
is always available for a period of one year if the foreclosure was Mortgage to aliens.
ef-fected extrajudicially, or where the mortgage was constituted in (b) when she asks for the declaration of his absence, and (c) in
favor of a bank or a banking or credit institution, regardless of As to whether an alien may accept a mortgage on privately- case of civil interdiction of the husband.19
whether the foreclosure was effected judicially or extrajudicially. On owned lands in the Philippines, after the promulgation of the 1935
the other hand, in the foreclosure of chattel mortgage, no right of Constitution, this question had been the subject of serious doubts Marital consent necessary under system of absolute
redemption can be invoked after the chattels have been sold at until Congress passed Republic Act No. 133, approved in 1947, pro- community of property.
public auction. Furthermore, where a real estate mortgage was viding that private real property may be mortgaged for a period not
foreclosed judicially and in the foreclosure sale the proceeds thereof exceeding five years, renewable for another five, in favor of any indi- Under the system of absolute community of the property of
are insufficient to cover the obligations secured, the creditor is not vidual, corporation, or association, but the mortgagee or his the spouses, Article 207 of the Civil Code of the Philippines
precluded to ask for a deficiency judgment to recover the balance. successor in interest, if disqualified to acquire or hold lands of public provides that neither spouse may alienate or encumber any
In the foreclosure of a chattel mortgage, however, where the price domain in the Philippines, shall not bid or take part in any sale of such common property without the consent of the other. In case of
of the thing sold at public auction is not sufficient, the creditor can real property as a consequence of such mortgage. unjustifiable refusal by the other spouse, the courts may grant
no longer recover the deficiency, if only to be consistent with Article the necessary consent. Thus, the husband is as powerless as the
2141 of the New Civil Code which states that the provisions of said It is to be noted, in this connection, that according to a legal wife under ordinary circumstances to mortgage conjugal property
Code on pledge, insofar as they are not in conflict with the Chattel opinion rendered by the Secretary of Justice for the Secretary of without the consent of the other.
Mortgage Law, shall be applicable to chattel mortgages, and Commerce and Industry, dated July 10, 1964 the aforementioned law
according to the pertinent provi-sion of Article 2115 of the same does not contemplate to disallow Filipinos and other persons qualified While the husband remains the administrator of the
Code on pledge, in connection with foreclosure, if the price of the to acquire and own lands in the Philippines from holding real estate conjugal partnership, he cannot alienate or encumber any real
sale is less, neither shall the creditor be entitled to recover the mortgages in excess of five years. It is inconceivable when they can property of the conjugal partnership, acquired after the taking
deficiency, notwithstanding any stipulation to the contrary. even acquire lands by outright sale. effect of the new Civil Code, without the wifes consent, unless
However, we are not unmindful of the previous rulings of the court the wife has been declared a non compos mentis or a spendthrift
rendered squarely on this point prior to the promulga-tion of the However, the aforementioned Republic Act 133, as amended by or is under civil interdiction or is confined in a leprosarium, or
New Civil Code to the effect that the amount received at the time of Republic Act 4381, was further amended by Republic Act 4882, unless she refuses unreasonably to give her consent, in which
the foreclosure sale of the chattels is only a payment pro tanto, and approved on June 17, 1967, eliminating the period limitation for case the court may compel her to grant the same. 20
an action may the maintained for the deficiency in the debt, mortgage of private real property, but imposing certain restrictions
arguing that to deny the mortgagee the right to maintain such upon the mortgagee or his successor-in-interest, if disqualified to Registration of mortgage; how effected.
action to recover would be to overlook the fact that the chattel acquire or hold lands of the public domain in the Philippines, by
mortgage is only given as a security and not as a payment for the forbidding him to take possession of the mortgaged property during The procedure in the registration of a mortgage is outlined
debt in case of failure of payment. the existence of the mortgage; neither is possession allowed after in Section 61 of Act No. 496, as amended by P.D. No. 1529. The
default of the mortgagor except for the sole purpose of foreclosure, mort-gage deed is filed together with the owners duplicate
Execution and registration of mortgage. receivership, enforcement of other proceedings and in no case for a certificate of title with the Register of Deeds of the city or
period of more than five years from the actual possession. Of course, province where the land lies. Thereupon, this official enters upon
As provided by Sec. 60 of P.D. No. 1529, the owner of such alien mortgage still cannot participate in the bidding nor take the original certificate of title and the owners duplicate certificate
registered land may mortgage the same by executing a mortgage part in any sale of such real property in case of foreclosure. a memorandum of the purport of the mortgage deed, the time of
deed, and such deed may be assigned, extended, discharged, filing, and the file number of the deed, signing the memorandum
released in whole or in part, or otherwise dealt with by the after the entry. He also notes down upon the mortgage deed the
26
time of filing and a reference to the volume and page of the one of the co-owners to be an alleged forger of the other who by his
registration book where it is registered. negligence and acquiescence made the fraud possible as between Where the mortgagor is the debtor or obligor himself, the
these two innocent persons, it was held that the negligent co-owner con-sideration of the mortgage is the debt or the obligation
Issuance of mortgagees title. must bear the loss.25 assumed and secured by this accessory contract. However, where
the mortgagor is a third person, who is not the debtor or obligor
At the instance of the mortgagee, the Register of Deeds shall In more recent cases involving two innocent parties, however, himself, there may arise a question as to the validity of the
make out and deliver to him a duplicate of the certificate of title, where a banking institution is one of them, a new trend seems to mortgage in view of the ap-parent lack of consideration. On this
similar to the owners duplicate, but with the wordsmortgagees have developed with the Supreme Court laying down a strict rule in point, the following principle has been laid down: The
duplicate stamped diagonally across its face. For records purposes, the choice of preference in favor of a private individual as against a consideration of a mortgage, which is an accessory contract, is
a memorandum of the issue of the mortgagees duplicate is made banking institution for special reason of apparent negligence and lack that of the principal contract, from which it receives its life, and
upon the original certificate of title.21 of good faith. Here, for instance, are substantially the concrete facts. without which it cannot exist as an independent contract, even if
A was the registered owner of a certain land. During his lifetime B the obligation thereby secured is of a third person, and therefore
This practice has now been discontinued. Under the provision executed an extrajudicial settlement of the estate of A, supposing him it will be valid, if the principal one is valid, and cannot be voided
of Section 60 of Presidential Decree No. 1529, no mortgagees or dead, wherein As property was adjudicated to B. Thereafter, B on the ground of lack of consideration. 28
lessees duplicate certificate of title shall be issued by the Register mortgaged the same property to the PNB. The question raised is
of Deeds, and those issued prior to the effectivity of said Decree whether A could still recover the property at this stage, without Suppose the loan agreed upon to be secured by a mortgage
are deemed cancelled and the holders thereof required immediately respecting the mortgage executed by B in favor of the PNB. This is- has not yet been released, nor the corresponding promissory
to surrender same to the Registrar of Deeds concerned. sue was decided in favor of A, adhering to the same principle that as note signed by the debtor, may the mortgage instrument
between two innocent parties, in this case it is A and the PNB, one of executed in advance be considered valid? In a case filed seeking
Mortgage by non-owner unenforceable; exception. whom must suffer the consequence of a breach of trust, the one who the annulment of such a mortgage and the extrajudicial
made it possible by his act of confidence must bear the loss. In foreclosure thereof on the ground that it was invalid because
Where a mortgagor has no title at all to the property favoring the private individual as against the Bank as mortgagee, the when it was executed there was yet no principal obligation to
mortgaged, the mortgage is void. Thus, even if the person signing Court explains that it accords more with justice and equity, in the secure as the loan had not yet been released, so that in the
the mortgage has been duly constituted and appointed as the light of the common practice of banking institutions, which is a matter absence of a principal obligation there was want of consideration
attorney-in-fact of the owner, with express power to mortgage, it is of public knowledge, that before approving a loan, they send out in the accessory contract of mortgage, it was held that the fact
still necessary that the document make some descriptive recitals representatives to the premises of the land offered as collateral to that the loan agreed upon had not yet been released on the date
indicative of the fact that he was acting in representation of the investigate who are the owners thereof. Banks, indeed, should of the execution of the mortgage is immaterial. It was explained
owner. Where the instrument has not been made and signed in the exercise more care and prudence in dealing even in registered lands, that the contract of loan being a consensual contract, such
name of such owner or principal, the mortgage is not valid as to than private individuals, for their business is one affected with pub-lic contract was deemed perfected at the time the contract of
said owner.22 interests, keeping in trust money belonging to their depositors, which mortgage was executed.
they should guard against loss by not committing any act of
In line with the same principle, a mortgage of real property negligence which amounts to lack of good faith by which they would Extent of subject matter of mortgage.
executed by one who was not yet the owner thereof at the time of be denied the protective mantle of the Land Registration Act as ex-
the execution of said mortgage is without legal existence. This is so tended only to purchasers for value and in good faith, as well as to While a mortgage directly and immediately subjects the
even if the mortgagor subsequently acquired the same property. mortgagees of the same character and description. 26 property described therein and upon which it is imposed to the
The legal remedy in such a case is to have the mortgage confirmed fulfillment of the obligation secured (Art. 2126, new Civil Code),
and ratified subsequent to the acquisition. 23 Thus, the surviving On the other hand, where certain registered land was donated it extends further to the natural accessions, to the
widow, upon the death of her husband, can validly mortgage only and the donee subsequently mortgaged the land to a bank, and improvements, growing fruits, and the rents or income not yet
such portion of the conjugal property as may finally be allotted to thereafter the donation pursuant to which the Torrens title covering received when the obligation becomes due, and to the amount of
her in the settlement of the estate of her deceased husband, that the mortgaged property was declared null and void, what would be its the indemnity granted or owing to the proprietor from the
is, in the division of the conjugal property upon the termination of legal effect upon the mortgage to the bank which was foreclosed and insurers of the property mortgaged, or in virtue of expropria-tion
the co-ownership.24 In that way, the essential requisite of Article the subject property sold at public auction? Would the annul-ment of for public use, whether the estate remains in the possession of
2085, paragraph (b), of the Civil Code, providing that the the donation operate to render the mortgage also null and void to the the mortgagor, or it passes into the hands of a third person. 30
mortgagor must be the absolute owner of the thing mortgaged, will prejudice of the purchaser at the foreclosure sale? Under the
have been fully met. circumstance, it was held that where a Torrens title of the land was in It is to be borne in mind that the basic object of a real
the name of the donee-mortgagor and said land later given as mortgage is land, and as a rule the word land includes every
However, as an exception to the rule, we have a case where security for a bank loan, the subsequent declaration of said title as estate and inter-est in land. It therefore follows that, unless
the choice is between two innocent personsan innocent co-owner null and void is not a ground for nullifying the mortgage rights of the otherwise reserved, all buildings and improvements existing
who did not participate in the execution of the mortgage but was bank, which had acted in good faith, and in the same token the rights thereon are deemed included.
negli-gent, and the innocent mortgagee who relied upon a Torrens of the purchaser at the foreclosure sale. 27
Title and loaned money in all good faith on the basis of the title Future property as subject matter.
standing in the name of the mortgagors, only thereafter to discover Consideration of mortgage.
27
A stipulation to include in the mortgage other property to be one in its place, no stipulation whatever being contained in the For business accommodation, banking practices permit the
subsequently acquired by the mortgagor is without legal effect, mortgage deed that the new building should be expressly excluded granting of continuing credit line, such as overdraft, to be
even if the instrument of mortgage was registered, because it is an from the mortgage encumbering the land and the construction secured by mortgage. Under such contract, the mortgagor is
essen-tial requisite of such a contract that the mortgagor be at the thereon, it is unquestionable that the mortgage actually includes the permitted to take the money or so much thereof as may be
time the absolute owner of the thing mortgaged. Thus, in a case new build-ing, which forms one indivisible whole with the land or lot needed from time to time, and thus avoid the necessity of paying
where a mortgage was executed containing a stipulation that, on which it was erected.33 interest until the necessity for its use actually arises.
inasmuch as the land therein described and given as security was
not sufficient to cover all the obligations, the mortgagor constituted A building constructed by the owner of a mortgaged land is an A mortgage given to secure advancements is a continuing
a mortgage on any other property he might acquire in the future, it improvement thereon, within the purview of Article 2127 of the new secu-rity, and the mere fact that the payments on a particular
was held that such stipulation did not constitute a valid mortgage Civil Code, and is included in the mortgage although constructed after day equal the amount of the mortgage will not discharge the
on the property subsequently acquired, even if there has been a the said mortgage was constituted. It is explained that Article 1409 mortgage before maturity so long as advancement may be
notice of lis pendens recorded upon the title of the new property, (3) of said Code, which declares as void and inexistent contracts such demanded and are received. For the purpose of determining the
when judicial foreclosure of the original mortgage was instituted. In as those whose cause or object did not exist at the time of the amount due upon the mortgage at maturity, there being money
holding that such stipula-tion does not constitute a valid mortgage transaction and Article 2085 which requires that the mortgagor be paid to the mortgagor little by little and repayments are made
upon the newly acquired property, the court stated that the the absolute owner of the thing mortgaged and that the person con- from time to time, the advancements and the repayments are
mortgagor could not legally mortgage any property he did not yet stituting the mortgage should have the free disposal of the property taken together.39
own, applying Article 2085, paragraph 2, of the Civil Code, and that or is legally authorized for the purpose, being general provisions,
in order that a mortgage may be validly constituted the instrument must yield to particular provisions, namely, Article 2127 of the new By the same token, a stipulation in a mortgage contract to
by which it is created must be recorded in the office of the register Civil Code and Articles 110 and 111 of the Spanish Mortgage Law, in in-clude as part of the obligation secured future amounts that
of deeds (Article 2125, id) and so far as the additional property is view of the rule that it is the special and specific provisions which may be borrowed by the mortgagor from the mortgagee was
concerned the registration of the mortgage did not affect and could must control and the general provisions which must yield, and this is held to be valid where the consideration for which the mortgage
not have affected it because it was not specifically described irrespective of their dates or relative positions in the statute.34 may stand as security is not limited to the amount actually
therein. The filing of a notice of lis pendens with the registry of obtained at the time, and from the four corners of the instrument
deeds purporting to affect the additional property served only to Machineries and fixtures included in real mortgage; when the intent to secure future and other indebtedness can be
emphasize the fact that there was no mortgage ther-eon, otherwise excluded. gathered.40
there would have been no necessity for any notice of lis pendens.31
It is a well-settled rule that all objects permanently attached to Mortgage constituted by private document not legal.
Incidentally, it may be mentioned here that the principle with a mortgaged building or land are deemed included. That includes not
respect to mortgage of future property may not necessarily be only fixtures but also machinery and other objects placed upon and In order to constitute a legal mortgage, it must be executed
appli-cable to sale. For instance, where a person who is not yet the used in connection with the mortgaged estate. If it is intended to in a public document, besides being recorded. A provision in a
owner of the land sells or alienates it to another, and later the seller exclude any of them, it is indispensable that it be so stipulated private document, although denominating the agreement as one
acquires title thereto, such title passes to the buyer by operation of between the contracting parties.35 of mortgage, cannot be so considered as it is not susceptible of
Article 1434 of the New Civil Code. The sale is thus validated and inscription in the property registry. A mortgage in legal form is
the seller cannot validly offer the same property to another buyer Fruits and rents of mortgaged property included. not constituted by a private document, even if such mortgage be
for a better price and thereby realize greater profit, even with the accompanied with deliv-ery of possession of the mortgaged
intention of refunding to the first buyer the price previously paid for All growing fruits on the mortgaged land are deemed to be property.41
the same property. The seller is held under estoppel by deed. included in the mortgage, provided they have not yet been gathered
when the obligation secured falls due. Between the creditor under the Besides, by express provisions of Section 127 of Act No.
Future improvements included in mortgage. real mortgage and the creditor under a subsequent chattel mortgage, 496, a mortgage affecting land, whether registered under said
the former shall prevail.36 However, where it appears that a third Act or not registered at all, is not deemed to be sufficient in law
It is a rule established by the Civil Code and also by the Mort- person as a creditor in possession has in good faith made advances nor may it be effective to encumber or bind the land unless made
gage Law, with which the decisions of the Courts of the United for the growth and production of the crop, in a suit by the mortgagee substantially in the form therein prescribed. It is required, among
States are in accord, that in a mortgage of real estate the to recover the value of growing fruits, such creditor is entitled to be other things, that the document be signed by the mortgagor
improvements on the same are included; therefore, all objects first paid the amount of his advances before the mortgagee may hold executing the same, in the presence of two witnesses, and
permanently attached to a mortgaged building or land, although liable the growing fruits under Article 2127 of the new Civil Code. 37 acknowledged as his free act and deed before a notary public. A
they may have been placed there after the mortgage was mortgage constituted by means of a private document obviously
constituted, are also included.32 With respect to rents, only such rents of the mortgaged property does not comply with such legal requirements.
as are not collected when the obligation falls due, and all rents pay-
Where a parcel of land, together with the building thereon able until the credit is satisfied, are deemed included. 38 Furthermore, by express provision of Article 1358 of the
erected, has been mortgaged, and where after execution of the new Civil Code, acts and contracts which have for their object,
mort-gage but before the expiration of the mortgage period, the Continuing credit secured by mortgage. among other things, the creation of real rights over immovable
debtor tears down the building and erects another and more costly property must appear in a public document. By the constitution
28
of a mortgage upon real property, there is created in favor of the No. 496 may also be applied to the registration of a mortgage of the debt; for, said transfer having been made without the
mortgagee such real rights. affecting registered land.45 consent of the creditor, the contract was not thereby novated. 50

Mortgage not registered; effect. Thus, in a case where the subject of a mortgage was limited to a Novation of mortgage may only be accomplished with the
share of a co-owner in the property described in a certificate of title ex-press, not implied, consent of the mortgagee. In the above-
Before the promulgation of the New Civil Code, a mortgage af- and does not in any way affect the interest and participation of the cited case, if there were a novation, the effect would be that the
fecting land registered under the Torrens system or under the other co-owners, and the registration of said mortgage could not be original debtor would have been relieved of the obligation and
Span-ish Mortgage Law, although constituted in a public document, given due course because the other co-owners refused to surrender only the transferee of the mortgaged property would be bound.
was not valid even as between the parties unless registered in the the duplicate certificate of title, it was held that for the registration of
registry of deeds. However, the failure to register did not nullify the such a mortgage, if the owners duplicate title is being withheld or Incidentally, it may be stated here that neither extension of
obligation secured. As between the parties, such contract otherwise could not be presented at the time of registration, the time to pay an obligation necessarily constitutes a novation.
constituted a valid subsisting obligation and could be used as procedure outlined in Section 72 of Act No. 496 may be availed of by Thus, it was held that the act of giving a debtor more time to pay
evidence or proof in an ac-tion for collection. Once a judgment was the interested party to the end that registration of the mortgage may an obligation is not a novation that will extinguish the original
obtained, the same property could be attached on execution and be accomplished.46 debt. In order to extinguish or discharge an obligation by
sold at public auction.42 novation the intent of the parties to do so (animus novandi) must
Assignment of mortgage; registration. be either expressed or else clearly apparent from the
On the other hand, a mortgage affecting land not registered incompatibility on all points of the old and the new obligations.
un-der the Torrens system or under the Spanish Mortgage Law, By express provisions of law (Section 60, Act No. 496, as
although not recorded under Act No. 3344, was considered valid as amend-ed by P.D. 1529), it is required that an assignment of The mere fact that the purchaser of an immovable has
between the parties.43 mortgage be registered, the same to take effect upon the title only notice that the property is encumbered with a mortgage does not
from the time of registration. This does not mean, however, that as necessarily render him liable for the payment of the mortgage
The foregoing rulings of our Supreme Court seem to discrimi- between the parties the assignment is without legal effect, unless debt, in the absence of stipulation or condition that he is to
nate between mortgages affecting lands registered under the registered. assume payment thereof, be-cause the mortgage is merely an
Torrens system or under the Spanish Mortgage Law and mortgages encumbrance as distinct from the principal obligation secured. Of
affect-ing unregistered lands. With a view to doing away with the Thus, it was held that the alienation or assignment of a credit course, if the principal obligor does not pay, the mortgagee may
possible confusion and adopting a uniform rule, our Civil Code now secured by mortgage is valid and efficient and legally transfers the foreclose the mortgage and have the property sold at public
provides, among other things, in Article 2125 that if the dominion or ownership of the same, even if the transfer of said credit auction, applying the proceeds of the sale to the satisfaction of
instrument is not re-corded, the mortgage is nevertheless binding was not recorded in the registry.47 The danger lies, however, in the the mortgage obligation.52
between the parties.44 fact that meanwhile the interest of a third person may intervene, and
unless the assignment takes effect upon the title, which can only be Mortgagee in bad faith.
May mortgage be registered without the owners duplicate done thru registration, the assignee may not be able to avail himself
title? of the due protection of the law. A property was acquired by a bank after the filing of an
action for specific performance was filed and the fact that the
Where a mortgage deed has been filed for registration and the Under Article 2128 of the Civil Code and Article 152 of the foreclosure and public auction sale took place after the institution
owners duplicate certificate of title is being withheld by the owner Mortgage Law, the mortgage credit may be alienated or assigned to a of the case is immaterial since the foreclosure sale retroacts to
or otherwise could not be presented at the time of registration, the third person, provided that it is effected in a public instrument, notice the date of the con-stitution of the mortgage. It further argued
Register of Deeds may be requested to proceed in accordance with thereof given to the debtor, and it is recorded in the Registry. 48 that it was a purchaser for value long before the filing of the
Section 72 of Act No. 496 (now Section 71, P.D. No. 1529), in which However, the rule requiring that the assignment be constituted in a specific performance case and thus, it cannot be considered a
case he shall send within twenty-four hours notice by mail to the public instrument or that the instrument be recorded in the Registry transferee pendente lite.
registered owner, stating that such mortgage has been registered, of Property where it involves real property, applies only to the case of
and requesting that the owners duplicate certificate be produced in third persons and the mortgagor is not considered third person. The Supreme Court considered the argument specious. The
order that the corresponding memorandum of the mortgage could Hence, as to the mortgagor the assignment may be binding even if it bank acquired the property only after the filing of the case for
be made thereon. If the owner neglects or refuses to comply within be made in a private instrument.49 specific performance. When the mortgage was constituted, the
a reasonable time the Registrar may suggest the fact to the court, bank was not yet, properly speaking, a transferee, being a mere
and the court, after notice, may enter an order to the owner to Sale of mortgaged property does not necessarily constitute mortgagee of the property. Only when it acquire the property in
produce his certificate at a time and place to be named therein, and novation of mortgage. the foreclosure sale and subsequently consolidated its title did it
may enforce the order by suitable process. become the transferee of the property. Thus, the bank is a
The fact that the mortgagor has transferred the mortgaged transferee pendente lite of the prop-erty in litigation within the
The above practice is generally followed only in cases of prop-erty to a third person does not relieve him of his obligation to contemplation of Rule 29, Section 47(b). As such, it is bound by
attach-ment and notice of lis pendens. Under special pay the debt to the creditor, although the person to whom he has the decision against Demetrio Llego. As the Supreme Court held
circumstances, however, the provisions of said Section 72 of Act transferred the property has assumed the obligation to pay said debt, in one case: . . . A transferee pendente lite stands exactly in the
and the creditor accepted payments from said transaction on account shoes of the transferor and is bound by any judgment or decree
29
which may be rendered for or against the transferor; his title is Where the property mortgaged is registered in the registry of mortgage or lease them for more than one year without the
subject to the incidents and results of the pending litigation, and property under the Torrens system provided by Act No. 496, as Article written consent of the mortgagee. This stipulation, styled pact de
his transfer certificate of title will, in that respect, afford him no 107 of the Mortgage law is made inapplicable by express provision of non alienando, some-times found in mortgages executed in
special protection. Section 124 of said Act No. 496, said stipulation not to make a new Louisiana and derived from the Spanish law, binds the mortgagor
mortgage not being contrary to law, morals, or public order, is valid neither to sell nor encumber the mortgaged property to the
The bank insists that it is not a transferee pendente lite and is, therefore, an obstacle to the registration of subsequent prejudice of the mortgagee; does not nullify the sale in favor of a
because it was a purchaser for value long before the case for mortgages in the registry of property.53 third person, but gives the mortgagee the right to proceed
specific performance was filed. The contention is without merit. directly against the property, found in the purchasers
Even if it is not a transferee pendente lite, nevertheless cannot As to whether the above ruling may be considered neutralized by possession, in a proceeding against the mortgagor alone and
claim a right superior to that of private respondents because the provision of Article 2130 of the Civil Code of the Philippines, to the without notice to the purchaser.57
petitioner acted in bad faith when it foreclosed and acquired the effect that a stipulation forbidding the owner from alienating the
property. The bank was aware of the charge of fraud against the immovable mortgaged shall be void, will depend upon whether, by In a certain case of donation involving real estate subject to
mortgagor in mortgaging the prop-erty to it despite the previous statutory construction the word alienating embraces the act of a pre-existing mortgage, where the mortgage contract contained
sale to another person. The trial court found the existence of fraud mortgaging. a stipulation prohibiting the mortgagor to alienate the property
in the transaction and declared to be the absolute owners of the without the mortgagees consent, and the latter refusing to give
property. As already stated, this decision of the trial court is now But the mere fact that the mortgagee has authorized the debtor its consent to the contemplated donation, it was held that the
final and is binding on petitioner bank. In the meantime, the bank to mortgage the property described in the mortgage given to secure prohibition against such subsequent alienation is valid as not
consolidated its title over the property. Since the bank acquired the the debt to a third party does not imply the cancellation of said mort- being contrary to law, mor-als or public interest, and that the
land in question with knowledge of the fraud committed by the gage, for which the cancellation of its registration in the registry is mortgagee cannot be compelled by the courts to give its consent
owner, it cannot claim to be a purchaser in good faith and, necessary, nor the extinction of the debt which subsists even suppos- to the registration of such deed of donation by delivering for the
therefore, to have a better right than its predecessor-in-interest. ing the mortgage was cancelled.54 purpose the certificate of title in its possession, contrary to the
prohibition.
The case of St. Dominic vs. IAC, 151 SCRA 577, in which it Second mortgage valid although constituted violation of pact.
was held that the foreclosure sale retroacts to the date of the It is to be noted, however, that under the new Civil Code of
registra-tion of the registration of the mortgage and that a person If the making of a second mortgage except with the written the Philippines, Article 2130, a stipulation forbidding the owner
who takes a mortgage in good faith and for valuable consideration, consent of the mortgagee is prohibited, and the contract continues from alienating the immovable mortgaged shall be void. The
the record showing clear title to the mortgagor, will be protected and states the penalty for such a violation, namely, it gives to the reason for this is quite obvious, and that is, to preserve to the
against equi-table claims on the title in favor of third persons of mortgagee the right to immediately foreclose the mortgage, it does owner one of the legal attributes of ownership.
which he had no actual or constructive notice cannot be applicable not give him the right to treat the second mortgage as null and void.
to this case. In the case of St. Dominic, when the property was Right of mortgagor to sell the mortgaged property.
mortgaged to the bank, the title showed that it was valid, regular, Authorization to constitute second mortgage understood
and free from any lien or encumbrance. When it was later unless prohibited. In Sps. Litonjua, et al. vs. L and R Corp., et al. vs.
foreclosed, fold at public auction and a new transfer certificate of G.R. No. 130722, Dec. 9, 1999 the question asked was
title was issued to the buyer, the notice of lis pendens was not As a rule there is no need to ask for authorization in order that whether the agreement that the mortgagor cannot sell the
carried over to the new title. And, when the property was sold to the mortgagor may mortgage the same land for the second time, mortgaged prop-erty without the consent of the mortgagee
petitioner, St. Dominic Corporation, which was again issued TCT No. since the law permits him to do so, without prejudice to the previous such that if it is sold without his consent, valid or not?
22337, no notice of any lien of encumbrance appeared on the title. mortgage. To seek the previous consent of the first mortgagee, in the
These factual circumstances led the Court to conclude that the ab-sence of any agreement to that effect, is to ask what the Held:
mortgagee bank and its subsequent transferees had acted in good mortgagor is already permitted by law to do, even without such
faith. It is obvious that the case of St. Dominic Corporation vs. IAC authorization.56 It is not valid as it contravenes Article 2130, NCC
cannot be invoked in this case where both the trial court and the which provides that a stipulation forbidding the owner from
CA found that petitioner bank did not act in good faith in acquiring Mortgage prohibiting subsequent alienation. alienating the immovable mortgaged shall be void citing
title to the property. Tambunting vs. Rehabilitation Finance Corp., 176 SCRA 493
The appellee relies upon the stipulation in the mortgage deed (1989) where it was said that the prohibition against
Under the doctrine of the mortgagee in good faith, despite executed in its favor by the spouses R which prohibits the latter from subsequent contracts can only be directed against
the fact that the mortgagor is not the owner of the mortgaged alienating or encumbering the mortgaged lands without its written subsequent mortgages or encumbrances, not alienation of
property, his title being fraudulent, the mortgage contract and any consent, and contends that the sales made in favor of the spouses A the immovable itself. (see Phil. Industrial Co. vs El Hogar
foreclosure sale arising therefrom are given effect by reason of S. and B. L. and the appellants are null and void because its written Filipino, et al., 45 Phil. 336). Such prohibition against sale
public policy. (Cavite Development Bank vs. Lim, 324 SCRA 346). consent had not been previously obtained, thus violating the said or disposition is void as it practically gives the mortgagee
stipulation. The said stipulation reads: The mortgagor, during the the sole prerogative to prevent any sale of the mortgaged
Stipulation against subsequent mortgage. lifetime of the mortgage, may not sell or in any way alienate the prop-erty to a third party. The mortgagee can simply
mort-gaged properties, or encumber the same by a subsequent withhold its consent and thereby, prevent the mortgagor
30
from selling the property. This creates an unconscionable confirmation cures the defect consisting in the latters not having the assets of the estate; or (2) he may foreclose the mortgage,
advantage for the mortgagee and amounts to a virtual assigned it before to the creditor in payment of the debt, as was by ordinary action in court, making the executor or administrator
prohibition on the owner to sell his mortgaged property which stipulated. a party defendant, and if there should be deficiency after the sale
is contrary to law. of the mortgaged property, he may prove the same in the estate
How mortgage may be discharged. proceeding, or (3) he may continue to rely upon his mortgage
Pactum commissorium, nature and effect. and foreclose it, if necessary, in due time, in which case he will
A mortgage may be discharged by the creditor executing a not be admitted anymore as creditor of the estate with right to
Pactum commissorium, as understood in this jurisdiction, is a public instrument cancelling or releasing the mortgage, substantially share in the distribution of the assets.65
stipulation empowering the creditor to appropriate the thing given in accordance with the form prescribed by Section 127 of Act No. 496,
as guaranty for the fulfillment of the obligation in the event the ob- and the instrument being presented with the office of the Register of Thus, if the mortgagee elects one of the alternatives
ligor fails to live up to his undertakings, without further formality, Deeds of the city or province where the land lies, together with the enumerated above, he must abandon the others. So, if he fails in
such as foreclosure proceedings, and a public sale. Es el pacto de owners duplicate title, for registration. Thereupon, a memorandum of one his cause is lost. He is not permitted to annoy those
la ley comisoria en las ventas de inmuebles el que se reglamenta cancellation is annotated. interested in the estate of a deceased person by two actions for
en el articulo 1504 (10 Manresa, Comentarios al Codigo Civil, p. exactly the same purpose. A multiplicity of actions is abhorrent
260) and these agreements are declared void by the Civil Code in Incidentally, a problem may arise as to whether by order of the to the law and is not permitted in equity and justice. 66
whatever contract they are found. Historically, in point of view of court a subsisting mortgage may be cancelled or discharged condi-
strict law, pactum commissorium, referred to in Law 41, Title 5, tioned upon the posting of a surety bond. To order the substitution of It was held also that most of the provisions of our Code of
and Law 12, Title 12 of the Fifth Partida, and included in Articles the mortgage for a surety bond would, in effect, operate as a Civil Procedure (now superseded by the Rules of Court) were
1859 and 1884 of the Civil Code, presumes the existence of the novation of the basic contract entered into by the parties, thereby taken from that of California, and in that jurisdiction the rule has
contract of mortgage or pledge or that of antichresis. 59 discharging the mortgage. This cannot be done without the express always been, and still is, that a party who sues and obtains a
consent at least of the mortgagee. To substitute the subsisting personal judgment against a defendant upon a note waives
Thus, a covenant in a deed of mortgage which stipulates that mortgage with a surety bond would convert such lien on the property thereby his right to foreclose the mortgage securing it. In this
upon failure to redeem the mortgage the transaction shall affected from a right in rem to a right in personam and would abridge jurisdiction, a creditor holding a claim against the deceased,
automati-cally become one of sale without further action in Court the mortgagees right under the mortgage contract. 62 secured by a mortgage or other collateral security, has to elect
constitutes a pactum commissorium, and is therefore null and between enforcing such security or abandoning it by presenting
void.60 Stipulation of tipo or upset price in mortgage contract. his claim before the committee (now taken over by the Clerk of
Court) and share in the general assets of the estate. Under this
Promise to pay debt with realty given in security, validity. A stipulation in a mortgage of real property fixing a tipo or provision, it has been uniformly held that, if the plaintiff elects
upset price to become operative in the event of a foreclosure was held one of the remedies thus provided, he waives the other and if he
While Article 1859 (now Article 2088) of the Civil Code forbids to be ineffective, for according to statutes the property must be sold fails, he fails utterly.67
the creditor, upon breach of the principal obligation, to appropriate to the highest bidder at the auction sale. The parties to the mortgage
the property given as security, an agreement by the mortgagor, cannot by agreement contravene the statutes and interfere with the Unregistered sale superior over a registered mortgage.
that in the event of his failure to pay the debt when due the same existing legal procedure.63
will be paid with the mortgaged property, is valid and enforceable. The registered right of the mortgagee of the property is
Thus, where the debtor acknowledged a debt under the following Hence, the purchaser at public auction who won the bid at a inferior to the unregistered right of the buyer to whom the
terms: price lower than that fixed in advance by agreement of the parties to property was conveyed earlier. The reason is that the original
the contract must have to be upheld. But suppose the purchaser owner had partied with his ownership of the thing sold then he
x x x and if I cannot pay the aforesaid amount, when happens to be the creditor or mortgagee himself, will the same rule no longer had ownership and free disposal of that thing so as to
the date, agreed upon comes, the same shall be paid with the apply? This question, although suggested in a subsequent case, 64 has be able to mortgage it again. Registration of the mortgage is of
lands given as security, the lot and house and lands remained unresolved. While the pro and the con on this issue may no moment since it is understood to be without prejudice to the
described in the aforesaid seven documents. have good grounds on their respective sides, we feel more inclined to better right of third persons. (Dela Merced vs. GSIS, et al., 365
believe that, insofar as the creditor or mortgagee is concerned, the SCRA 1). It was further said that when the purchaser or
it was held that such a stipulation is valid as it does not authorize stipulations regarding the upset price should be binding for his mortgagee is a financing institution, like the GSIS, the general
the creditor to appropriate the property pledged or mortgaged, nor concurrence thereto places him under estoppel. rule that a purchaser or mortgagee of land is not required to look
to dispose thereof, and constitutes only a promise to assign said further than what appears on the face of the title does not apply.
property in payment of the obligation if, upon its maturity, it is not Recourse left to mortgagee upon death of mortgagor. The constructive knowledge of the mortgagee of the defect in the
paid.61 title of the subject property, or lack of such knowledge due to
Rule 86, Section 7, of the Rules of Court, leaves the mortgagee negligence, takes the place of registration of the rights of a party
In this case, the creditor went further by selling the property three alternative recourses, should the mortgagor die without hav-ing who to whom the property had been earlier sold. If the title came
to a third person without waiting for the debtor to first assign or settled the obligation secured by the mortgage, as follows: (1) He from a foreclosure sale which was void because the mortgagor
transfer to him the property. Such sale, according to the court, is may abandon the security and prosecute his claim by filing it with the was not the owner, the title derived by the buyer in the sale did
not void per se; and if such a sale is confirmed by the debtor, said office of the Clerk of Court, and share in the general distribution of not acquire a better right.
31
Court. It was held that where a person intervenes as a subordinate publicity had been effected such that those interested might
Nemo potest plys juris ad alium transfere quam ipsa habet. No one lien-holder in a foreclosure case, merely to oppose the confirmation of at-tend the public sale, and the purpose of the law had
can transfer a greater right to another than he himself has. The the sale upon learning that such a sale had been made, he does not been thereby subserved.
rule is based on the legal truism that the spring cannot rise higher thereby become a party to the suit to the extent of being bound by
than the source. the judgment in the foreclosure case.68 In this case, a notice of extrajudicial foreclosure sale was
pub-lished on August 25, September 1, and 8, 1985 in a
Mortgagee as an indispensable party. The requirement for joinder of the person claiming an interest newspaper of general circulation in Metro Manila in accordance
subordinate to the mortgage sought to be foreclosed is not manda- with Section 3, stating that the foreclosure sale would be held on
A mortgagee of a real property is an indispensable party in an tory in character but merely directory, in the sense that failure to September 25, 1985.
action for declaration of nullity of title. It was argued in Metrobank comply therewith will not invalidate the foreclosure proceedings, 69 but
vs. Alejo, G.R. No. 141970, Sept. 10, 2001 that the mortgagee at most will only leave the equity of redemption unforeclosed as However, although the notice of foreclosure sale was duly
cannot possibly be an indispensable party, since the mortgage may against such lienholder not included as party defendant. 70 Thus, pub-lished, the sale did not take place as scheduled on
not even be valid because of the possible absence of compliance where a second mortgagee was not made a party to the proceeding September 25, 1985. Instead, it was held more than two months
with the requirement (Artcle 2085, NCC), that the mortgagor be to foreclose a first mortgage, an independent foreclosure proceeding after the published date of the sale or on January 7, 1986. This
the absolute owner of the thing mortgaged. It should be may be maintained against him by the creditor in the first mortgage, renders the sale void. As held in Masantol Rural Bank, Inc. vs.
emphasized, however, that at the time the mortgage was in which proceeding the court should require the second mortgagee to CA, 204 SCRA 752; Tam-bunting vs. CA, 167 SCRA 16, in which
constituted, there was an existing title which named the redeem from the first mortgagee within three months, under penalty the foreclosure sale likewise took place several months after the
mortgagors as the registered owners of the property. In Seno vs. of being debarred from the exercise of his right to redeem. 71 date indicated in the published notice of sale:
Mangubat, 156 SCRA 113, it was held that:
The same rule applies not only to a subordinate lienholder or Act No. 3135, as amended, which governs the
The well-known rule in this jurisdiction is that a person encumbrancer, but also to a purchaser of real property subject to a extrajudicial foreclosure of mortgages on real property
dealing with a registered land has a right to rely upon the face pre-existing mortgage.72 Thus, it was held that where the mortgaged specifies the following publication requirements:
of the Torrens Certificate of Title and to dispense with the property is sold to subsequent purchasers, the mortgage debtor and
need of inquiring further, except when the party concerned the purchasers are necessary parties in the action to foreclose the Sec. 3. Notice shall be given by posting notices of the
has actual knowledge of facts and circumstances that would mortgage, these purchasers having or claiming an interest in the sale for not less than twenty days in at least three public
impel a reasonably cautious man to make such inquiry. premises subordinate in right to that of the holder of the mortgage places of the municipality or city where the property is
being foreclosed.73 Accordingly, where the purchaser at a foreclosure situated, and if such property is worth more than four
xxx xxx xxx sale of unregistered property applies for the original registration in his hundred pesos, such notice shall also be published once a
name of the land sold, and a subordinate lienholder has not been week for at least three consecutive weeks in a newspaper of
Thus, where innocent third person relying on the correct- impleaded in the foreclosure proceeding, the land may be registered general circulation in the municipality or city.
ness of the certificate of title issued, acquire rights over the in the purchasers name but subject to the lienholders unforeclosed
property, the court cannot disregard such rights and order the equity of redemption. It is settled doctrine that failure to publish the notice
total cancellation of the certificate for that would impair public of auc-tion sale as required by the statute constitutes a
confidence in the certificate of title; otherwise everyone deal- Requisites in foreclosure sale. jurisdictional defect which invalidates the sale. The Court is
ing with property registered under the Torrens system would not persuaded either that the evidence presented by
have to inquire to every instance as to whether the title has Under Act No. 3135, Sec. 3, if the value of the property subject Masantol Bank sufficiently established its compliance with
been regularly or irregularly issued by the court. Indeed this is of the foreclosure is more than (P400.00, the notice of sale must be the statutory requirement of no-tice, or that the testimony
contrary to the evidence purpose of the law. posted and published. The failure to post a notice is not per se a of Remedios Sorianos witness showed non-compliance with
ground for invalidating the sale provided that the notice thereof is such requirement. (Masantol Rural Bank vs. CA, supra.)
After the land has been originally registered, the Court of duly published in a newspaper of general circulation. As explained in
Land Registration ceases to have jurisdiction over contests Olizon vs. CA, 236 SCRA 148: The foregoing ruling squarely applies in this case, although
concerning the location of boundary lines. In such case, the action the lack of republication of the notice of sale has not been raised,
in personam has to be instituted before an ordinary court of Newspaper publications have more far-reaching effects the Court is possessed of ample power to look into a relevant
general jurisdiction. (Aguilar vs. Chui, 195 Phil. 613; Cerofer Realty than posting on bulletin boards in public places. There is a issue, such as the lack of jurisdiction to hold the foregoing sale.
Corporation vs. CA, et al., G.R. No. 139539, Feb. 5, 2002). greater probability that an announcement or notice published in (DBP vs. Aguirre, et al., G.R. No. 144877, Sept. 7, 2001).
a newspaper of general circulation, which is distributed nation-
Foreclosure suit; necessary parties thereto. wide, shall have a readership of more people than that posted in Action to foreclose subject to prescription.
a public bulletin board, no matter how strategic its location may
All persons having or claiming an interest in the mortgaged be, which caters only to a limited few. Hence, the publica-tion of Title to registered land does not stand on the same footing
property subordinate in right to that of the holder of the mortgage the notice of sale in the newspaper of general circulation alone as right to a registered mortgage, in the sense that while title to
should be made defendants in the action for the foreclosure of the is more than sufficient compliance with the notice-posting reg-istered land under the Torrens system does not prescribe
mortgage, in accordance with Rule 68, Section 1, of the Rules of requirement of the law. by such publication, a reasonably wide even for a hundred years, the right of action to foreclose a
32
mortgage affecting registered land prescribes after ten years province to another. Besides, when improper venue is not objected to Judgment on foreclosure.
according to Article 1142 of the new Civil Code. Thus, in a case prior to the trial, it is deemed waived. 79
where the obligation guaran-teed by a mortgage became due and If upon the trial in such action the court shall find the facts
demandable more than twenty-years ago, the mortgage remaining It is a settled doctrine that when a contract of mortgage covers set forth in the complaint to be true, it shall ascertain the
unforeclosed and the mortgage contending that the action to various parcels of land situated in different provinces, the Court of amount due to the plaintiff upon the mortgage debt or obligation,
foreclose did not prescribe by reason of the fact that Section 46 of First Instance of any of said provinces has jurisdiction to take cogni- including interests and costs, and shall render judgment for the
the Land Registration Act provides that No title to registered land zance of an action for foreclosure of the mortgage, and the judgment sum so found due and order that the same be paid into court
in derogation to that of the registered owner shall be acquired by therein rendered can be executed in the other provinces where the within a period of not less than ninety days from the date of the
prescription of adverse possession, it was held that the law cited rest of the real estate is situated.80 There is no need of instituting service of such order, and that, in default of such payment, the
did not apply inasmuch as the citation only speaks of the title of the another action in any other place for the foreclosure of one and the property be sold to realize the mortgage debt and costs. 85
registered owner and refers to prescrip-tion or adverse same mortgage. The other court has no jurisdiction to render a sec-
possession as a mode of acquiring ownership, which goes to show ond judgment upon the same obligation and a second foreclosure of However, where the mortgagee filed within the 90-day
that the whole philosophy of the law is merely to make a Torrens the same mortgage, and should dismiss the petition seeking such reglemen-tary period a petition for writ of execution or the sale
title indefeasible and surely not to cause a registered lien or relief.81 of the mortgaged property, and the mortgagor failed to oppose
encumbrance such as a mortgage and the right of action to the petition, or the auction sale as announced by the sheriff, as
enforce it imprescriptible as against the registered owner. The Attachment as additional remedy to foreclosure. well as the petition for the confirmation of the sale and the
important effect of the registration of a mortgage is obviously to approval of the certificate of sale issued by the sheriff to the
bind third parties; it does not go further as to make the action to A mortgagee has the right to rely on the mortgaged property, purchaser, but only woke up to impugn the validity of the
foreclose it imprescriptible.75 un-diminished and unimpaired by any superior lien or legal proceedings when the mortgagee who bought the property at the
impediment brought about by the act or omission of the mortgagor. In auction sale filed a motion for writ of possession of the property,
However, recourse may be had to foreclose a mortgage, a mortgage foreclosure proceeding the court has jurisdiction to grant said mortgagor is guilty of laches and as such should alone be
notwith-standing the fact that the personal action to recover the an attach-ment against the property of the debtor, to be levied upon blamed for the consequence.86
indebtedness secured by said mortgage may have prescribed at the property not covered by the mortgage, upon proper showing by
time when the foreclosure is instituted, so long as the debt has not affidavit that the value of the mortgaged property is insufficient to But suppose the judgment rendered only awarded the
in fact been paid and the latter action has not itself prescribed. 76 cover the debt and that the debtor has disposed or is about to dispose recovery of a sum of money, with the alternative clause that only
of his other property with intent to defraud his creditors. 82 in default of payment thereof would the mortgage be foreclosed,
Formerly, under the provision of Article 1964 of the old Civil but that before the full satisfaction of the amount adjudged the
Code, mortgage actions prescribed in twenty years. This period has As a matter of fact, it was pointed out that the rule is well- subject matter of the mortgage was burned or destroyed, how
been reduced to ten years by Article 1142 of the new Civil Code established that the creditor may waive whatever security he has and could the foreclosure as the alternative remedy granted in the
which took effect on August 30, 1950. In an actual case where maintain a personal action, in the absence of statutory prohibi-tion. judgment be enforced? Under the circumstance, it was held, the
action to enforce a mortgage became effective from August 4, remaining portion of the judgment which can no longer be
1940, or before the approval of the new Civil Code, the problem Right of mortgagee to take possession. enforced may he made subject matter of an independent civil
arose as to whether the prescriptive period should be governed by action where the period of five years had already elapsed since
the old Civil Code or by the new Civil Code. Following the old Civil In a leading case,84 the question raised on appeal was the valid- the date of the finality of said judgment.87
Code, it should pre-scribe on August 6, 1960; while under the new ity of a stipulation in a mortgage contract authorizing the mortgagee
Civil Code, it should prescribe on August 6, 1950. Here it was held to take possession of the mortgaged property upon foreclosure of the Buyer in foreclosure sale acquires title free from rights of
that the new Civil Code should apply, and therefore action to mortgage. In deciding the question, the Supreme Court, after making subsequent mortgagee.
foreclose in this particular case is deemed to have prescribed, the reference to Article 1859 (now 2088) of the Civil Code, which provides
reason being that under Article 1116 of the new Civil Code, that the creditor may not appropriate to himself the things given in Where property is subject to two successive mortgages, and
Prescription already running before the effectivity of this Code pledge or mortgage, or dispose of them, and also Article 1884 (now the first one has been foreclosed, what will be the effect of the
shall be governed by laws previously in force, but if since the time 2137) of the same Code, which provides that the nonpayment of the foreclosure sale upon the second mortgage? The second
this Code took effect the entire period herein required for debt within the term agreed upon does not vest the ownership of the mortgage is thereby ex-tinguished, and the buyer in the
prescription (ten years) should elapse the present Code shall be property in the creditor and that any stipulation to the contrary shall foreclosure sale acquires title to the property free from the
applicable, even though by the former laws, a longer period might be void, held that the stipulation in question authorizing the second mortgage which is a mere subordinate lien. The sole right
be required.77 mortgagee, for the purposes therein specified, to take possession of of the second mortgagee, aside from the right to repurchase as
the mortgaged premises upon foreclosure of the mortgage is not may be permitted by law, is to apply for the excess of the
Venue in an action for foreclosure. repug-nant to either of these articles. On the other hand, such proceeds of the sale after the payment of the credit of the first
stipulation is in consonance with or analogous to the provisions of mortgage and other legal expenses.88
An action for foreclosure of mortgage on real property may be Article 1881 (now 2132) et seq. of the Civil Code regarding
commenced and tried in the city or province where the property or antichresis and the pro-visions of the Rules of Court regarding the In line with the same principle, any subsequent lien or
any part thereof lies.78 However, by agreement of the parties, the appointment of a receiver as a convenient and feasible means of encum-brance annotated at the back of the certificate of title
venue of an action may be changed or transferred from one preserving and administering the property in litigation. cannot in any way prejudice a mortgage previously registered,
33
and the lots subject thereto pass to the purchasers at the public question of legal title be tried or decided in proceedings looking to the That the sale has not been fairly and regularly
auction free from all lien or encumbrance such as the notice of an exercise of the power of the court to put a purchaser in possession. A conducted, or
adverse claim recorded after the mortgage. very serious question may arise upon full proofs as to where the legal
title to the property rests, and should not be disposed of in a That the price was inadequate and the inadequacy is so great
Thus, it will be seen that the right of a subordinate lienholder summary way. The petitioner, it is held should be required to establish as to shock the conscience of the court. 100
cannot be enforced upon the property, until after the legal claims of his title in a proceeding directed to that end.96
the superior lienholder shall have been fully satisfied. This rule is With respect to the second ground above-enumerated, it is
true, whether the foreclosure has been carried out judicially or Proceeds of foreclosure sale, how disposed of. gen-erally presumed that the method adopted in selling the
extrajudicially. property in foreclosure is the one best calculated to realize the
Rule 68, Section 4, of the Rules of Court provides that the pro- greatest amount for the property sold. In order that such sale
It may be stated, however, in this connection that a ceeds of the sale shall be paid to the person foreclosing the may be set aside upon the ground that the property was sold in
foreclosure sale is not complete until it is confirmed, and before mortgage, after deducting therefrom the expenses of the sale, and if an improper mode, it must appear that the sale was fraudulent
said confirma-tion the court retains control of the proceedings by there is any surplus the same shall be paid to junior encumbrancers, or unfair or that the method adopted substantially prejudiced the
exercising sound discretion in regard to it, either granting or if any, in the order of their priority as may be determined by the party seeking to set aside the sale. Accordingly, a foreclosure
withholding confirma-tion as the rights and interests of the parties court, otherwise the entire surplus shall be turned over to the sale will not be set aside where it appears that the mode of sale
and the ends of justice may require. 90 The maxim caveat emptor, mortgagor or his agent or to the person entitled thereto. adopted was the most advantageous to all parties, or at least,
which means purchaser beware, applies only to execution sales and was not prejudicial to any.101
not to a sheriffs sale by stipulation of the parties in a mortgage The application of the proceeds from the sale of the mortgaged
contract.91 property to the mortgagors obligation is an act of payment, not In connection with the last ground above-stated, it was held
payment by dation; hence, it is the mortgagees duty to return any that the sale of the mortgaged property cannot be annulled for
Right of buyer to take possession. surplus in the selling price to the mortgagor.97 reason of inadequacy of price (1) when there is no evidence as to
the real market value of the land sold, and (2) when there is no
The general rule is that after a sale has been made under a Deficiency judgment after foreclosure sale. showing that another purchaser was ready to offer a higher price
decree in a foreclosure suit, the court has the power to give than that for which it was adjudicated by the sheriff to the
posses-sion to the purchaser, and the latter will not be driven to an If the proceeds of the sale be not sufficient to cover the highest bidder.102
action at law to obtain possession. The power of the court to issue obligation owing to the mortgagee, the court, upon motion, may
a process and place the purchaser in possession is said to rest upon render a deficiency judgment against the debtor-mortgagor for the So also in a case where the mortgagor attempted to annul
the ground that it has power to enforce its own decree and thus balance, upon which execution may issue immediately. But it would an extrajudicial foreclosure sale on the ground that the price for
avoid circuitous actions and vexatious litigations. 92 be premature to ask the court for a deficiency judgment before the which his property had been sold was unconscionable, the
sale for then it is not yet known whether or not deficiency would Supreme Court took into account the fact that during the
Where the foreclosure has been carried out extrajudicially and exist.98 redemption period he could have mortgaged said property to a
the mortgaged property sold at public auction, after the expiration bank or sold it to any other person in order to pay the mortgage
of the prescribed period of redemption the buyer may take over the It should be borne in mind, however, that a deficiency judgment indebtedness. He having made no such effort and, if he did, he
possession of the property foreclosed as a matter of right. Thus, in is not available against any mortgagor. For if the mortgagor is not the having not succeeded in selling the property to any person or
a case where the writ of possession was issued but its enforcement debtor himself, a deficiency judgment as a rule will not lie. Thus, it entity for a higher price, it only goes to show that the amount for
was suspended by the Sheriff who has no authority to do so, and was held that one who mortgages his property to secure the debt of which the property was sold at public auction was not
later by the order of the Judge on a very dubious ground such as another without expressly assuming the personal liability for such unconscionable.103
humanitar-ian reason, it was held that inasmuch as the applicable debt cannot be compelled to pay the deficiency remaining due after
laws allow the buyer to have possession of the property foreclosed the mortgage is foreclosed.99 He could have also sold his right to redeem and thus
and mandate the court to give effect to such right, it would be a recover any loss that he might have suffered by reason of the
gross error for the Judge to suspend the implementation of the writ When may foreclosure sale be set aside? alleged unconscion-able price. As a matter of fact, the lesser the
of possession, which should issue as a matter of course. price the easier it is for the mortgagor to effect the
It is a fundamental rule that the setting aside of a foreclosure redemption.104
But where a party in possession was not a party to the sale is largely a matter of judicial discretion. But, for the purpose of
foreclos-ure, and did not acquire his possession from a person who appealing to the sound discretion of the court, any of the following Thus, unless representation is duly made when the
was bound by the decree, but who is a mere stranger and who grounds may be invoked and, if proven, may cause the setting aside Certificate of title is cancelled by reason of the foreclosure of the
entered into pos-session before the suit was begun, the court has of the sale: superior mort-gage lien that irregularities attended the
no power to deprive him of possession by enforcing the decree. 94 foreclosure, such as lack of notice to or non-inclusion of inferior
Thus, it was held that only parties to the suits, persons who came That there was fraud, collusion, accident, mutual mistake, breach of lienholders, the Register of Deeds is authorized to issue a new
in under them pendente lite, and trespassers or intruders without trust or misconduct by the purchaser; or title to the highest bidder due to the consolidation of his right
title can be evicted by a writ of possession.95 The reason for this upon foreclosure, without carrying over the annotation of
limitation is that the writ does not issue in case of doubt, nor will a subordinate liens.
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redemption, if any, or the final deed of conveyance executed in favor
Separate auction of individual lots not required in of the purchaser. The sale, which shall be under the direction of the sheriff,
foreclosure sale. the justice or auxiliary justice of the peace of the municipality, or
Extrajudicial foreclosure of mortgage. of a notary public of said municipality, shall be made at public
The rule that when the sale is of real property, consisting of auction between the hours of nine in the morning and four in the
several known lots, they must be sold separately, applies to sales A mortgage may be foreclosed extrajudicially only if there has afternoon. In this sale, the creditor, trustee, or other person
on execution (Rule 39, Section 21, Rules of Court) but not to sales been inserted in or attached to the real estate mortgage a special authorized to act for the creditor, may participate in the bidding,
in connection with foreclosure of mortgages. Even if it is assumed power of attorney conferring upon the mortgagee the power to sell and purchase under the same conditions as any other bidder,
that the prohibition applies to such foreclosure sales, still a the mortgaged property at public auction in the event of foreclosure, unless the contrary has been expressly provided in the mortgage
particular sale cannot be set aside where it is not shown that a conformably to the procedure prescribed in Act No. 3135, as amended or trust deed under which the sale is made.
better price could have been obtained if the lots were sold by Act No. 4118.
separately, or that the sale of one lot alone would bring sufficient Particular formality when not required in power of
proceeds to satisfy the judgment in the foreclosure suit. 106 A power to sell extrajudicially conferred upon the mortgagee is a sale.
power that survives the death of the mortgagor because it is an
Supersedeas bond, purpose in forelosure of mortgage. agency coupled with interest. 108 To constitute such power coupled with In a contract of mortgage giving the mortgagee the election
interest, the rule is that there should coexist in the agent, along with to foreclose it extrajudicially, but where the power of sale was
In an action to foreclose a real estate mortgage, the judgment the power given him, an interest or estate in the thing to be disposed not con-ferred expressly as in the following stipulation:
is secured by the mortgaged property and, therefore, the of. It is not meant an interest in the exercise of the power but an
supersedeas bond is not intended to cover the full amount of the interest in the property on which the power is to operate. 109 3. It is also stipulated that the mortgagee, in selling
judgment when appealed. The only purpose of the supersedeas the property at public auction, shall follow the procedure
bond in such a case is to secure the payment of any deficiency As to the place of sale, it cannot be made legally outside of the provided for in Act No. 3135, the mortgagor in any case to
judgment that may be entered against the defendant, on the province or city in which the property is situated; and in case the be notified by the mortgagee in writing by registered mail of
theory that by reason of the delay caused by the appeal the place within said province or city in which the sale is to be made is the sale.
mortgage may become inadequate to secure the full amount of the the subject of stipulation, such sale shall be made in said place or in
judgment for the value of the mortgaged property may fall in the the municipal building of the municipality in which the property or it was held that the mortgagee is thereby empowered to sell the
meantime that the interest on the principal of the judgment piles part thereof lies. mortgaged property without proceeding in court in accordance
up. Thus, it was held that if the supersedeas bond had been based with the provisions of Act No. 3135. 114 Although a power of sale
on the full amount of the judgment, the same must be reduced Publication is also required by posting notices of the sale for not will not be recognized as combined in a mortgage unless it is
accordingly.107 less than twenty days in at least three public places of the given by express grant in clear and explicit terms, and that there
municipality or city where the property is situated, and if such can be no implied power to that effect, it is generally held that no
Registration of final record in judicial foreclosure. property is worth more than four hundred pesos, by publishing such particular formality is required in the creation of the power of
notice once a week for at least three consecutive weeks in a sale. Any words are sufficient which evince an intention that the
For transferring title after judicial foreclosure, Section 63 of newspaper of general circulation in the municipality or city. In order sale may be made upon default or other contingency.115
Act No. 496, as amended by P.D. No. 1529, requires that a certified that a newspaper may be said to be of general circulation in a
copy of the final decree of the court confirming the sale under municipality, it must have regular subscribers, buyers and readers Effect of failure to post notice in foreclosure sale.
foreclosure proceedings be filed with the register of deeds after the therein.110 The law does not require that notice of auction sale be
time for ap-pealing therefrom has expired, and the purchaser shall given by the mortgagee to the mortgagor.111 Under Act No. 3135, Section, if the value of the property
thereupon be entitled to the entry of a new certificate and to the sub-ject of the foreclosure is more than P400.00, the notice of
issuance of a new owners duplicate certificate, a memorandum The contention that there was no personal notice in the fore- sale must be posted and published. The failure to post a notice is
thereof being at the same time likewise endorsed upon the closure of mortgage is untenable. There being no contractual stipula- not per se a ground for invalidating the sale provided that the
mortgagors duplicate certificate. However, prior to the entry of a tion therefor, personal notice is not necessary and what governs is the notice thereof is duly published in a newspaper of general
new certificate of title, the mortgagor or any other person general rule in Sec. 3 of Act 3135, as amended which directs the circulation. As the Supreme Court explained in Olizon vs. CA,
interested may, by proper legal proceedings, impeach any posting of notices of the sale in at lease three (3) places of municipal- newspaper publications have more far-reaching effects than
foreclosure affecting registered land. ity where the property is situated, and the publication thereof in a posting on bulletin boards in public places. There is a greater
newspaper of general circulation in said municipality.112 probability that an announcement or notice pub-lished in a
On the other hand, Rule 68, Section 7, of the Rules of Court, newspaper of general circulation, which is distributed nationwide,
requires that the final record of a foreclosure proceeding shall set However, foreclosure of mortgages by rural banks are exempt shall have a readership of more people than that posted in a
forth, in brief, the petition and other pleadings, judgment and from the publication in newspaper where the total amount of loan and public bulletin board, no matter how strategic its location may
orders, the proceedings under the order of sale, the order interest due and unpaid does not exceed P3,000. It is sufficient that be, which caters only to a limited few. Hence the publication of
confirming the sale, the name of the purchaser, with a description there be posting of such notices in three most conspicuous public the notice of sale in the newspaper of general circulation alone is
of the property by him purchased, and the certificate of places in the municipality or barrio where the land is situated during a more than sufficient compliance with the notice-posting
period of sixty days immediately preceding the public auction. 113 requirement of the law. By such publication, a reasonably wide
35
publicity had been affected such that those interested might attend as an apparent deviation from the general rule, that where the parties redemptioner. There is thus no legal obligation to exercise the
the public sale, and the purpose of the law had been thereby entitled to redeem were duly notified of the sale, which sale was even right of redemption. This right can in no sense be considered an
subserved. (DBP vs. Aguirre, et al., 364 SCRA 755). postponed upon their own request, such circumstance has relevance obliga-tion, for the mortgagor is under no compulsion to exercise
in the consideration of the equities, as distinguished from the purely the same. Should he choose not to exercise it, nobody can
However, although the notice of foreclosure sale was duly pub- legal technicalities; and on account of such actual notice on the part compel him to do so, nor will such choice give rise to a cause of
lished, the sale did not take place as scheduled but instead, it was of said parties entitled to redeem and of their subsequent agreement action in favor of the purchaser at public auction. If the
held more than two months after the published date of the sale. to postpone the sale, the concept of legal redemption would seem to redemptioner chooses to exercise his right of redemption, it is
This renders the sale void. have been abandoned and converted into one of conventional the policy of the law to aid rather than to defeat his right. It
redemption, in which case the only governing factor was the stands to reason, therefore, that redemption should be looked
Mortgage creditor to control details of sale. agreement between them. Hence, the registration of the certificate of upon with favor and where no injury is to follow, a liberal
sale sufficiently in advance to be able to reckon the one-year period construction will be given to our redemption laws as well as to
It is to be noted that the law on extrajudicial foreclosure of within which to redeem, would entirely be unnecessary and irrelevant the exercise of the right of redemption. As to the redemption
mortgage contains no provision that notice of the sale be given the to the question of when the right of redemption should commence or price, it is not the amount of the mortgage loan but the auction
executing mortgagee-creditor. The absence of the provision is ex- expire.119 Need-less to say, in this connection, that their actual notice purchase price plus 1% interest per month on said amount up to
plained by the fact that it is the creditor who causes the mortgaged of the sale is more than registration itself inasmuch as the latter only the time of redemption, together with the taxes or assessment, if
property to be sold, and the date of sale is fixed upon his accomplishes constructive notice. any, paid by the purchaser after the purchase. 124
instruction because it is he who causes the sale and controls its
details. That the creditor should fix the date of the sale is clearly to However, where the subject of the mortgage is a homestead and The above rule regarding the redemption price, however,
be inferred from the provision that it is he (the creditor) who is this has been sold at public auction by virtue of an extrajudicial does not apply where the foreclosing mortgagee is the
required by the law to give notice of the sale and its date to the foreclosure, the same may be repurchased by the mortgagor and Development Bank of the Philippines, wherein it was held that
mortgagor. Where, therefore, the sheriff sets a day for the sale homesteader within five years, in accordance with Section 119 of the mortgagor whose property was sold at public auction, either
different from that fixed for it by the creditor, in violation of the Commonwealth Act No. 141 otherwise known as the Public Land judicially or extrajudi-cially, shall have the right to redeem the
orders of the latter or of the understanding he had with the Act.120 On the question of when to commence the running of the five- property by paying all the amounts owed to the Bank on the date
creditor, the sheriff exceeds the limits of his authority, and the sale year period, it was held that the period within which a homesteader of the sale, with interest thereon at the rate specified in the
so executed is null and void. In such case, the debtors recourse, if or his widow or heirs may repurchase a homestead sold at public contract, and not the amount for which the property was
he has any, is against the sheriff for damages but not against the auction or foreclosure sale under Act No. 3135, as amended, begins acquired at the foreclosure sale, for the reason that the charter
creditor.116 not on the date of the sale when merely a certificate is issued by the of the Development Bank of the Philippines so requires the
sheriff or other official, but rather on the date after the expiration of payment of such amount. 125
Right of redemption in foreclosure of mortgage. the one-year period of repurchase provided by said law, when the
deed of absolute sale is executed and the property formally As regards the interest on the purchase price, the date of
In all cases in which an extrajudicial foreclosure sale has been transferred to the purchaser.121 In support of this conclusion, the re-demption being computed from the date of registration of the
made under a special power, the debtor, his successors in interest Supreme Court cited an earlier case, 122 wherein it was held that the certifi-cate of sale, such interest should also be made to
or any judicial creditor or judgment creditor of said debtor, or any certificate of sale issued to the purchaser at an auction sale is commence from that date. As to the fees paid to the Register of
person having a lien on the property subsequent to the mortgage intended to be a mere memorandum of the purchase. It does not Deeds for the registration of the certificate of sale, plus the
or deed of trust under which the property has been sold, may transfer the property, but merely identifies the purchaser and the interest thereon, the non-payment thereof by the mortgagor will
redeem the same within the term of one year from and after the property, states the price paid and the date when the right of not render invalid the redemption since the legal requirements
sale. redemption expires. The effective conveyance is made by the deed of for a valid redemption have been substantially complied with.
absolute sale executed after the expiration of the period of And so also with the non-payment of real estate taxes on the
The term successor-in-interest includes one to whom the redemption. subject property since this should not affect the regularity and
debt-or has transferred his statutory right of redemption; or one to validity of the redemption made by the mortgagor.126
whom the debtor has conveyed his interest in the property for the The purpose of the law in fixing a period of redemption where
purpose of redemption; or one who succeeds to the interest of the the mortgage has been foreclosed extrajudicially is to afford the It is to be borne in mind, in this connection, that in judicial
debtor by operation of law; or one or more joint debtors who were owner or mortgagor a chance to recover his property inasmuch as foreclosure of mortgage, there is no right of redemption reserved
joint owners of the property sold; or the wife as regards her almost invariably he forfeits it at a great loss as it is purchased to the debtor or mortgagor, unless expressly permitted by law.
husbands homestead by reason of the fact that some portion of usually at a nominal cost by the mortgagee himself who ordinarily However, before the sale is confirmed by the court, it is not
her husbands title passes to her.117 bids at no more than the credit or the balance thereof at the auction considered final or perfected; so that, before such confirmation,
sale. That is the reason why the law gives him, who is decidedly at a the mortgagor has still a chance to redeem the property. This is
The period of redemption begins to run, according to judicial great disadvan-tage, a chance to redeem the property within a fixed otherwise known as equity of redemption. Thus, the equity of
construction, not from the date of the sale but from the date of period.123 redemption in judicial foreclosure in favor of the mortgagor,
registration of the sale in the office of the Register of Deeds, apply- consisting in the equitable right to redeem the mortgaged
ing this rule not only to execution sale but also to an extrajudicial Such right of redemption is an absolute privilege, the exercise of property, may be exercised within a period of ninety days from
foreclosure sale of registered land.118 It may not be amiss to state, which is entirely dependent upon the will and discretion of the the order of foreclosure or even thereafter but before the judicial
36
confirmation of the sale. When the foreclosure sale is validly the foreclosure sale to render nugatory the right of repur-chase has been reenacted substantially in Sec. 16 of the present
confirmed by the court, title to the property vests upon the granted by law to the mortgagor, by conveying the property to charter of the DBP, i.e., E.O. 81 (1986) as amended by R.A.
purchaser and the confirmation retroacts to the date of the sale. 127 another person for an amount beyond the capacity of said mortgagor 8523.
to pay.132
Under Section 3 of Rule 68 of the Rules of Court the sale Development Bank of the Philippines vs. CA notes the
pursu-ant to a judicial foreclosure, when confirmed by an order of How much to pay in case of redemption of a real property impres-sive consistency of the successive charters of the DBP
the court, shall operate to divest the rights of all the parties to the mort-gaged. with respect to the manner of redeeming properties mortgaged
action and to vest their rights in the purchaser, subject to such to it
rights of redemp-tion as may be allowed by law. The saving clause How much should a mortgagor pay to redeem a real property
quoted refers to the right of redemption expressly authorized by mortgaged if foreclosed extrajudicially by the Development Bank of Prior to the enactment of E.O. 82, the redemption
special laws, such as Acts 2747 and 2938, known as the charter of the Philippines? Must he pay to the bank the entire amount he owed price for property foreclosed by the Development Bank of
the Philippine National Bank, and Commonwealth Act No. 459 the latter on the date of the sale with interest on the total indebteb- the Philippines, whether judicially or extrajudicially, was
creating the Agricultural and Industrial Bank (succeeded by the ness at the rate agreed upon in the obligation, or is it enough for determined by Com-monwealth Act No. 459, which
Rehabilitation Finance Corpora-tion now the Development Bank of purposes of redemption that he reimburses the amount of purchase contained a provision substan-tially similar to Section 16 of
the Philippines), which allow the redemption in the foreclosure of with one per cent (1%) monthly interest thereon including other ex- E.O. 81 insofar as the redemption price was concerned x x
mortgages executed in favor of said banks. Where the mortgage penses defrayed by the purchaser at the extrajudicial sale? x Thus, in DBP vs. Mirang (66 SCRA 141), the Supreme
was not executed under any of the said special laws, its foreclosure Court held that appellant could redeem the subject property
does not come within the purview of the said saving clause. 128 The This was the question in DBP vs. West Negros College, Inc., G.R. by paying the entire amount he owed to the bank on the
period of redemption allowed is one year, to be counted not from No. 152359, Oct. 28, 2002. date of the foreclosure sale, with interest thereon at the
the date of the foreclosure sale but from the date of the rate agreed upon, pursuant to Section 31 of C.A. 459. The
confirmation thereof by the court. 129 This is so because the The Supreme Court said where the real property is mortgaged to ruling herein was reiterated by the Supreme Court in the
acceptance of a bid at the foreclosure sale confers no title on the and foreclosed judicially or extrajudicially by the Development Bank of more recent case of Dulay vs. Cariaga (123 SCRA 794). In
purchaser. Until the sale has been validly confirmed by the court, the Philippines, the right of redemption may be exercised only by the earlier case of Nepomuceno vs. Rehabilitation Finance
he is nothing more than a preferred bidder. Title vests only when paying the bank all the amount he owed the latter on the date of the Corporation (110 Phil. 42), the Supreme Court explained
the sale has been validly confirmed by the court. 130 sale, with interest on the total indebtedness at the rate agreed upon that Section 31 of C.A. 459, being a special law applicable
in the obligation from said date, unless the bidder has taken mate-rial only to properties mortgaged to the Rehabilitation Finance
Where the property sold as a consequence of foreclosure of possession of the property or unless this had been delivered to him, Corporation the predecessor of DBP should prevail over
mortgage is subject to redemption by the mortgagor partnership, a in which case the proceeds of the property shall compensate the Section 6 of Act No. 3135, which is the more general law
partner who redeems it in his personal capacity becomes a trustee interest. This rule applies whether the foreclosed property is sold to applicable to all mortgaged properties ex-trajudicially
and holds the property in trust for his co-partner, subject to his the DBP or another person at the public auction, provided of course foreclosed, regardless of the mortgage. (G.R. No. 139034,
right to demand from the latter his contribution to the amount of that the property was mortgaged to DBP. Where the property is sold June 6, 2001)
redemp-tion, plus legal interest. He cannot invoke the principle of to persons other than the mortgagee, the procedure is for the DBP in
subroga-tion, and this is especially true in a case where a person case of redemption, to return to the bidder the amount it received In Development Bank of the Philippines vs. Jimenez, the
redeems the mortgaged property from its purchaser at public from him as a result of the auction sale with the corresponding inter- Su-preme Court clarified the proper applications of Sec. 31 of
auction who had merely received from the sheriff a provisional est paid by the debtor. C.A. 459 and Sec. 30, Rule 39 of the Rules of Court, where it was
certificate of sale and who therefore had not become the absolute held that Section 31 of Commonwealth Act No. 459, and not
owner thereof with title which he could convey to the Section 26, Rule 39, of the Rules of Court, is applicable in case of
redemptioner.131 The foregoing rule is embodied consistently in the charters of redemption of real estate mortgaged to the DBP to secure a loan.
petitioner DBP and its predecessor agencies. Section 31 of CA 459 As such, the redemp-tion price to be paid by the mortgagor or
Suppose the buyer at the foreclosure sale, during the period creating the Agricultural and Industrial bank explicitly set the re- debtor to the DBP is all the amount he owes the latter on the
of re-demption, resells the property to another for an amount demption price at the total indebtedness plus contractual interest as date of the sale, with interest on the total indebtedness at the
greater than the mortgage obligations, the question to be of the date of the auction sale. Under R.A. 85 the powers vested in rate agreed upon, and not merely the amount paid for by the
determined is whether the mortgagor should repurchase the and the duties conferred upon the Agricultural and Industrial Bank by purchaser at the public auction, pursuant to Section 26, Rule 39,
property from the buyer at the foreclosure sale or from the C.A. 459 as well as its capital, assets, accounts, contracts and choses of the Rules of Court. (36 SCRA 426). Clearly the redemption of
subsequent purchaser, and in the latter case, what may be the in action were transferred to the Rehabilitation Finance Corporation. It properties mortgaged with the Development Bank of the
amount to be paid by him as consideration for the repurchase. Here has been held that among the salutary provisions of C.A. 359 ceded Philippines and foreclosed either judicially or extrajudicially is
it was held that the mortgagor is entitled to repurchase the to the Rehabilitation Finance Corporation by R.A. 85 was Sec. 31 governed by special laws which provide for the payment of all the
property either from the buyer at the foreclosure sale or from his defining the manner of redeeming properties mortgaged with the amounts owed by the debtor. This special protection given to a
transferee, and the amount to be paid therefore should be only corporation. Subsequently, by virtue of R.A. 2081, the pow-ers, gov-ernment lending institution is not accorded to judgment
such amount as may correspond to the principal obligation and the assets, liabilities and personnel of the Rehabilitation Finance creditors in ordinary civil actions. (Dulay vs. Carriaga, 208 Phil.
accumulated interest thereon up to and including the time of actual Corporation under R.A. 85 and C.A. 459, particularly Sec. 31 thereof, 702).
repurchase. A different ruling would render it easy for the buyer at were transferred to petitioner DBP. Significantly, Sec. 31 of C.A. 459
37
It is worth noting that the mortgage contract between from the instant case is the existence of provisions in the charter of the rate specified in the mortgage, and all the costs and other
petitioner DBP and Bacolod Medical Center as assignor of the government bank authorizing extrajudicial foreclosure and judicial expenses incurred by the bank or institution concerned
respondent West Negros College was expressly constituted, subject determining the amount required to redeem the foreclosed property. by reason of the execution and sale and as a result of the
to the provisions of R.A. 85 which by explicit reference include Sec. The charter provisions constitute a special law exclusively applicable custody of said property less the income received from the
31 of C.A. 459 requiring for purposes of redemption the payment of to properties mortgaged to the government bank in question, and as property. However, the purchaser at the auction sale concerned
all the amount that the mortgagor owed to DBP, with interest on such they prevail over Sec. 30 of Rule 39, Rules of Court which rep- shall have the right to enter upon and take possession of such
the total indebt-edness at the rate agreed upon in the obligation, resents a general law. In Dulay vs. Cariaga, the Supreme Court said property immediately after the date of the confirmation of the
reckoned from the date of the public auction. Respondent cannot that the mortgagor must pay his entire indebtedness to the auction sale and administer the same in accord-ance with law.
evade the application of this provision because it is part of its mortgagee plus the agreed interest thereon before redemption can be
undertaking as assignee of the mortgagor Bacolod Medical Center. effected, because the charter of the mortgagee (DBP) required the Redemption under the General Banking Act.
payment of such amount. Thus, while the charter of petitioner DBP
The cases of Co vs. Philippine National Bank and Philippine authorized the extrajudicial foreclosure of mortgaged property and its Pursuant to Section 78 of the General Banking Act, a
National Bank vs. CA are not controlling. These involve the redemp- redemp-tion effective only upon payment of the outstanding mortgagor whose real property has been sold at a public auction,
tion of property levied upon and sold at public auction to satisfy a indebtedness and interest, the charter of the Philippine National Bank judicially or extrajudicially, for the full or partial payment of an
judgment and unlike the instant case there is no charter that involved in the citations in question did not supply similar privileges obligation to any bank, shall have the right within one year after
requires the payment of sums of money other than those stipulated and would not therefore properly control the disposition of the instant the sale of the real estate to redeem the property. The one-year
in Sec. 30 of Rule 39, Rules of Court. In the cited cases the case. period is actually to be reckoned from the date of the registration
mortgage contracts were executed when the then charter of the of the sale. Clearly there-fore, respondents had only until May 8,
Philippine National Bank under R.A. 1300 did not provide for The unavoidable conclusion is that in redeeming the foreclosed 1992 to redeem the subject foreclosed property. Their failure to
extrajudicial foreclosure nor the amount necessary to redeem the property respondent West Negros College as assignee of Bacolod exercise that right of redemption by paying the redemption price
property foreclosed extrajudicially. In effecting an extrajudicial Medical Center should pay the balance of the amount owed by the within the period prescribed by law effectively divested them of
property foreclosed, the Philippine Na-tional Bank has then no other latter to petitioner DBP with interest thereon at the rate agreed upon said right. It bears reiterating that dur-ing the one year
recourse but to rely wholly upon Act No. 3135 in relation to Sec. 30 as of the date of the public auction on 24 August 1989. redemption period, respondents never attempted to redeem the
of Rule 39, Rules of Court for all mat-ters related thereto including subject property but instead persisted in their theory that the
the amount of redemption. It is thus fairly evident that at all the Mortgages; foreclosures; redemption; the one-year period is mortgage is null and void. To allow them now to redeem the
times relevant to the cited cases, the bank did not resort to Act No. actu-ally to be reckoned from the date of the registration of same property would, as petitioner aptly puts it, by letting them
3135 merely to find a proceeding for the sale but to secure basic the sale. have their cake and eat it too. (Union Bank of the Philippines vs.
authority for its actions. CA, 359 SCRA 480).
Pursuant to Section 788 of the General Banking Act, a mortga-
The import of the citations is further clarified by our state- gor whose real property has been sold at a public auction, judicially or Section 78 of the General Banking Act governs the
ment in Co vs. Philippine National Bank differentiating the latter extrajudicially, for the full or partial payment of an obligation to any determina-tion f the redemption price of the subject property. In
from Nepomuceno vs. Rehabilitation Finance Corporation in light of bank, shall have the right, within one year after the sale of the real Ponce de Leon vs. Rehabilitation Finance Corporation, 146 SCRA
the enactment of P.D. 694 (1975 Revised Charter of the Philippine estate to redeem the property. The one-year period is actually to be 862, the Court had occasion to rule that Section 78 of the
National Bank) which provided for extrajudicial foreclosure and re- reckoned from the date of the registration of the sale. their failure to General Banking Act had the effect of amending Section 6 of Act
demption price similar to the standard provisions in the charters of exercise that right of redemption by paying the redemption price No. 3135 insofar as the redemp-tion price is concerned when the
the Development Bank of the Philippines. In Co, the Supreme Court within the period prescribed by law effectively divested them of said mortgagee is a bank, as in this case, or a banking or credit
said unmistakably right. (Union Bank of the Philippines vs. CA, et al., 359 SCRA 480). institution. The apparent conflict between the provisions of Act
No. 3135 and the General Banking Act was, there-fore, resolved
Redemption in foreclosure under the General Banking Act. in favor of the latter, being a special and subsequent legislation.
In the Nepomuceno case, what confronted the Court This pronouncement was reiterated in the case of Sy vs. CA, 172
was a question relative to a mortgage with the Rehabilitation Under Section 78 of Republic Act. No. 337, otherwise known as SCRA 125 where it was held that the amount at which the
Finance Corporation. The Court found no difficulty in not the General Banking Act, approved July 24, 1948, it is expressly foreclosed property is redeemable is the amount due under the
applying Sec-tion 6 of Act No. 3135 because it found that provided that: In the event of foreclosure, whether judicially or ex- mortgage deed, or the outstanding obligation of the mortgagor
there is in Section 31 of the Charter of the RFC a provision trajudicially, of any mortgage on real estate which is security for any plus interest and expenses in accordance with Section 78 of the
basically similar to Section 25 of P.D. No. 694, now being loan granted before the passage of this Act or under the provisions of General Banking Act. It was therefore manifest error on the part
invoked here by PNB. Naturally, the Court upheld the RFCs this Act, the mortgagor or debtor whose real property has been sold of the Court of Appeals to apply in the case at bar the provisions
contention that the whole amount of the mortgagors at public auction, judicially or extrajudicially, for the full or partial of Section 30, Rule 39 of the Rules of Court in fixing the
indebtedness should be paid. But in the instant case, as payment of an obligation to any bank, banking, or credit institution, redemption price of the subject foreclosed property.
already discussed earlier, P.D. 694 came too late. within the purview of this Act, shall have the right, within one year
after the sale of the real estate as a result of the foreclosure of the Redemption in foreclosure under the Rural Bank Act.
Quite obviously, the pivotal circumstance that distinguishes Co respective mortgage, to redeem the property by paying the amount
vs. Philippine National Bank and Philippine National Bank vs. CA fixed by the court in the order of execution, with interest thereon at
38
Under the provision of Section 5 of Republic Act 720, begin with, he has not shown that he is the rightful owner thereof. Buyer in good faith/bad faith.
otherwise known as the Rural Bank Act, as amended by Republic (Alvarico vs. Sola, G.R. No. 138953, June 6, 2002).
Act 5939, in case of foreclosure of a mortgage involving a A purchaser in god faith or an innocent purchaser for value
homestead or land ac-quired under a free patent, the homesteader Anent petitioners contention that it was the intention of Fermina is one who buys property and pays a full and fair price for it, at
or free patent holder as well as his heirs shall have the right to for Amelita to hold the property in trust for him, we held that if this the time of the purchase or before any notice of some other
redeem the property sold in foreclosure within a period of two years was really the intention of Fermina, then this should have been clearly persons claim on or interest in it. (David vs. Malay, 318 SCRA
from the date of the auction sale in case of land not covered by a stated in the Deed of Self-Adjudication executed in 1983, in the Deed 711). One cannot close ones eyes to facts that should put a
Torrens title or two years from the date of the registration of the of Donation executed in 1984, or in a subsequent instrument. Absent reasonable person on guard and still claim to have acted in good
foreclosure in case of land covered by a Torrens title. any persuasive proof of that intention in any written instrument, we faith. As aptly explained by Justice Vitug:
are not prepared to accept petitioners bare allegation concerning the
Incidentally, however, where the land involved was acquired donors state of mind. The governing principle is prius tempore, potior jure
as a homestead or under a free patent, the question that may be (first in time, stronger in right). Knowledge by the first
raised is: Will the right of legal redemption provided in Section 119 Registration is not the equivalent of title. (Lee Tek Sheng vs. CA, buyer of the second sale cannot defeat the first buyers
of the Public Land Act be deemed inoperative upon the lapse of the 292 SCRA 544). Under the Torrens system, registration only gives rights except when the second buyer first registers in good
redemption period after the foreclosure sale? To be consistent with validity to the transfer or creates a lien upon the land. (Sajonas vs. faith the second sale. (Olivares vs. Gonzales, 159 SCRA
the current trend in the rulings in pertinent cases decided (Cassion, CA, 258 SCRS 79). It was not established as a means of acquiring 33). Conversely, knowledge gained by the second buyer of
et al. v. Phil. National Bank, 89 Phil. 560; Paras v. Court of Appeals, title to private land because it merely confirms, but does not confer, the first sale defeats taints his registration with bad faith.
et al., 91 Phil. 389; Manuel v. Phil. National Bank, 101 Phil. 968), ownership. (Republic vs. CA, 301 SCRA 366). The preferential right of (see also Astorga vs. CA, G.R. No. 58530, Dec. 26, 1984).
one cannot but be inclined to the view that the right of legal the first registrant of a real property in a case of double sale is always In Cruz vs. Cabaa, G.R. No. 56232, June 22, 1984, it was
redemption available to the patentee under Section 119 of the qualified by good faith under Article 1544 of the Civil Code. held that it is essential, to merit the protection of Article
Public Land Act may still be exercised to be reckoned from the date (Baricuatro vs. CA, 325 SCRA 137). A holder in bad faith of a cer- 1544, second paragraph, that the second realty buyer must
the property in-volved was formally transferred to, and the tificate of title is not entitled to the protection of the law, for the law act in good faith in registering his deed of sale. (citing
ownership thereof vested in, the purchaser at public auction. cannot be used as a shield for fraud. (Baricuatro vs. CA, supra.). Carbonell vs. CA, 69 SCRA 99; Crisostomo vs. CA, G.R. No.
95843, Sept. 2, 1992).
Effect of foreclosure by the GSIS. When the registration of a sale is not made in good faith, a party
cannot base his preference of title thereon, because the law will not The registration contemplated under Article 1544 has
If the GSIS forecloses a mortgage and there is already a protect anything done in bad faith. Bad faith renders the registration been held to refer to registration under Act 496 Land
confir-mation of the public auction, there is no more right of futile. Thus, if a vendee registers the sale in his favor after he has ac- Registration Act (now P.D. 1529) which considers the act of
redemption. In Bacaling vs. Muya, et al., G.R. No. 148404-05, Apr. quired knowledge that there was a previous sale of the same property registration as the operative act that binds the land. (See
11, 2002, it was held that there is no longer any right of to a third party, or that another person claims said property under a Mediante vs. Rosabal, 1 O/G. 900; Garcia vs. Rosabal, 73
redemption in a judicial foreclosure proceeding after the previous sale, or that the property is in the possession of one who is Phil. 694). On lands covered by the Torrens system, the
confirmation of the public auction. Only foreclosures of mortgages not a vendor, or that there were flaws and defects in the vendors purchaser acquires such rights and interest as they appear
in favor of banking institutions and those made extrajudicially are title, or that this was in dispute, the registration will constitute x x x in the certificate of title, unaffected by any prior lien or
subject to legal redemption. Since GSIS is not a banking institution bad faith, and will not confer upon him any preferential right. The encumbrance not noted therein. The purchaser is not
and the procedure of the foreclosure is not extrajudicial in nature, situation will be the same as if there had been no registration, and required to explore farther than what the Torrens title,
no right of redemption exists after the judicial confirmation of the the vendee who first took possession of the real property in good faith upon its face indicates. The only exception is where the
public auction sale of the said lots. shall be preferred. purchaser has actual knowledge of a flaw or defect in the
title of the seller or of such liens or encumbrances which, as
Equally important, under Section 44 of the Property Registration to him, is equivalent to registration. (see Sec. 39, Act 496;
Who may file an action for reversion. Decree (P.D. No. 1529), every registered owner receiving a certificate Bernales vs. IAC, G.R. No. 75336, Oct. 18, 1988;
of title in pursuance of a decree of registration and every subsequent Hernandez vs. Sales, 69 Phil. 744; Tajonera vs. CA, G.R.
A private individual may not bring an action for reversion or purchaser of registered land taking such certificate for value and in No. L-26677, Mar. 27, 1981).
any action which would have the effect of canceling a free patent good faith shall hold the same free from all encumbrances, except
and the corresponding certificate of title issue don the basis those noted on the certificate and enumerated therein. By his own allegations, petitioner admits he was not a
thereof, such that the land covered thereby will again form part of purchaser in good faith. A buyer of real property which is in the
the public domain. Only the Solicitor General or the officer acting in All told, the right of a buyer to rely upon the face of the title possession of another must be wary and investigate the rights of
his stead may do so. Since the title originate from a grant by the certificate and to dispense with the need of inquiring further is up- the latter. Oth-erwise, without such inquiry, the buyer cannot be
government, its cancellation is a matter between the grantor and held only when the party concerned had no actual knowledge of facts said to be in good faith.
the grantee. (De Ocampo v. Asis, 343 SCRA 716). Clearly then, and circumstances that should impel a reasonably cautious man to
petitioner has no standing at all to question the validity of anothers conduct further inquiry. Possession during period of redemption.
title. It follows that he cannot recover the property because, to

39
During the period of redemption the mortgagor is entitled to sufficient compliance with the notice-posting requirement of the law. the said period has expired and that the right of the vendor or
remain in possession of the property and to collect rents and profits By such publication, a reasonably wide publicity had been effected any interested party to redeem the property has not been
therefrom.133 However, if desired, the purchaser may take over with such that those interested might attend the public sale, and the exercised, is considered sufficient for the purpose of registering
the proper authority from the court, which may be granted upon purpose of the law had been thereby subserved. (DBP vs. CA, 364 the consolida-tion of ownership or issuing the corresponding
pe-tition filed in the original registration proceedings and furnishing SCRA 755). transfer certificate of title, provided the outstanding owners
a bond in an amount equivalent to the use of the property, to duplicate certificate is surren-dered. Section 78 of Act No. 496
indemnify the debtor in case the sale is set aside or in case the Real estate mortgages; extrajudicial foreclosures; writs of (now Section 75 of P.D. 1529) is not applicable. However, if the
property is re-deemed after the purchaser has been given posses-sion; Act No. 3135 property is redeemed, the instrument of redemption or
possession.134 As a matter of fact, even after the period of repurchase shall be treated as an ordinary deed of sale and
redemption has expired, possession of the property may be asked The law expressly authorizes the purchaser to petition for a writ registered accordingly; that is, in the case of registered land, the
by the purchaser upon motion for a writ of possession in the same of possession during the redemption period by filing an ex parte registration is accomplished by way of memorandum on the
action. It is not necessary to institute a regular action in order to motion under oath for that purpose in the corresponding registration proper certificate of title.139
secure possession of the property.135 or cadastral proceeding in the case of property with Torrens title; and
upon the filing of such motion and approval of the correspondent Deficiency in extrajudicial foreclosure sale.
In extrajudicial foreclosure of mortgage, once a bond is filed bond, the law also in express terms directs the court to issue the
and approved under Section 7 of Act No. 3135, as amended by Act order of a writ of possession. Under the legal provisions above copied, In judicial foreclosure of mortgage there is no question that
No. 4118, the court has no discretion to refuse the issuance of the the order for a writ of possession issues as a matter of course upon defi-ciency judgment may be asked and granted inasmuch as this
writ of possession in favor of the purchaser in the public auction filing of the proper motion and approval of the corresponding bond. recourse is expressly provided in Rule 68, Section 6, of the Rules
sale, or to set it aside on motion of the adverse party attacking the No discretion is left to the court. And any question regarding the of Court. But in extrajudicial foreclosure, which is resorted to in
courts jurisdiction to issue the same.136 It was also held that under regularity and validity of the sale (and the consequent cancellation of accordance with Act No. 3135, as amended, the law is silent as
the same section, the purchaser is entitled to the possession of the the writ) is left to be determined in a subsequent proceeding as to whether the mortgagee may recover the deficiency arising
property during the redemption period, provided that a proper outlined in Section 8. Such question is not to be raised as a from the extrajudicial foreclosure sale. This open gap in the law
motion has been filed, a bond approved, and no third person is justification for opposing the is-suance of the writ of possession, has been supplied by the Supreme Court after considering that
involved.137 since, under the Act, the proceeding is ex parte. (Sps. Camacho, et said Act No. 3135, as amended, neither contains any provision
al. vs. PNB, et al., 363 SCRA 352). which expressly or impliedly prohibits such recovery, by so
In an extrajudicial foreclosure sale of a mortgaged property, holding that Article 2131 of the new Civil Code, the Rules of
after the redemption period has expired, an ex parte motion for a Requisites for registration of sale in extrajudicial foreclos- Court (Section 6, Rule 68) and the Mortgage Law would justify
writ of possession may be filed without the necessity of filing a ure. the recovery of the deficiency by the mortgagee. It noted that
bond anent Sec. 70 of Act 3135, as amended. To impose a bond after all a mortgage is but a security for and not a satisfaction of
upon the purchaser who is now the owner of the foreclosed The instructions promulgated by the Chief of the General Land an indebtedness, and when the legislature expressly provides for
property would be unreasonable if not illogical for it there are any Registration Office (formerly Commissioner of Land Registration and the foreclosure thereof it can only mean that it intends to give
rights to be protected, they are those of the purchaser who as now Administrator of Land Registration Authority), with the approval the creditor the right to sue for any deficiency that may result
owner has a superior right over said property as against all other of the Secretary of Justice, to all Registers of Deeds require that the from such foreclosure.140
persons. Besides under Section 35, Rule 39 of the Revised Rules of deed of sale must be supported by a certificate of the sheriff, justice
Court the purchaser or his assignee is entitled to possession if no of the peace, or notary public, under whose direction the sale was The pendency of an action questioning the validity of a
redemption is made within 12 months after the sale. 138 made, purporting to show that said sale was conducted in accordance mortgage cannot bar the issuance of the writ of
with the provisions of Act No. 3135, as amended by Act No. 4118, possession after title to the property has been
Foreclosure under Act No. 3135. and stating among other particulars the following: (a) date, time, and consolidated in the mortgagee.
place of the sale; (b) names of the creditor and debtor; (c) name of
Under Act No. 3135, Section 3, if the value of the property the attorney-in-fact; (d) brief description of the property; (e) name of The pendency of an action questioning the validity of a
sub-ject of the foreclosure is more than P400.00, the notice of sale the highest bidder; and (f) selling price. However, if the deed of sale mort-gage cannot bar the issuance of the writ of possession the
must be posted and published. The failure to post a notice is not contains a narrative of how the sale was made, including the data just validity of a mortgage cannot bar the issuance of the writ of
per se a ground for invalidating the sale provided that the notice mentioned, and is jointly signed by the official who conducted the possession after title to the property has been consolidated in the
thereof is duly published in a newspaper of general circulation. sale, a separate certificate as above required may be dispensed with. mortgagee. The implication is clear: the period of redemption is
Newspaper publications have more far-reaching effects than not interrupted by the filing of an action assailing the validity of
posting on bullet-ing boards in public places. There is a greater The deed of sale must be executed by the attorney-in-fact ap- the mortgage, so that at the expiration thereof, the mortgagee
probability that an announcement or notice published in a pointed in the special power of attorney inserted in or attached to the who acquires the property at the foreclosure sale can proceed to
newspaper of general circu-lation, which is distributed nationwide, mortgage, and not by the official who conducted the sale at public have the title consolidated in his name and a writ of possession
shall have a readership of more people than that posted in a public auction. Registration is effected by means of a memorandum on the issued in his favor. To rule otherwise, and allow the institution of
bulletin board, no matter how strategic its location may be, which back of the certificate of title, in the same way as an ordinary deed of an action questioning the redemption would constitute a
caters only to a limited few. Hence the publication of the notice of sale with pacto de retro is registered. After the expiration of one year dangerous precedent. A likely offshoot of such a ruling is the
sale in the newspaper of general circulation alone is more than from the date of the sale, an affidavit of the purchaser, showing that institution of frivolous suits for annulment of mortgage intended
40
merely to give the mortgagor more time to redeem the mortgaged
property. (Union Bank of the Philippines vs. CA, et al., 359 SCRA
480).

oOo

41
Chapter XII The Philippines not being a common-law country, we cannot look Chattel mortgage as conditional sale leaves mortgagor
CHATTEL MORTGAGES upon a chattel mortgage as a sale or something that transfers title. right of redemption.
Yet, our Chattel Mortgage Law defines it in a tenor conveying the idea
Preliminary statement. of a conditional sale, as follows: It has been held that since a chattel mortgage is a
conditional sale (Section 3, Act No. 1508) and assuming that the
This chapter on chattel mortgages may seem to be out of A chattel mortgage is a conditional sale of personal prop- ownership of the chattels mortgaged passes to the mortgagee, 4
place in this work on LAND TITLES AND DEEDS, but, inasmuch as erty as security for the payment of a debt, or the performance of the only thing that can be attached under an execution against
we have covered real estate mortgages in our discussion in the some other obligation specified therein, the condition being that the mortgagor is his right to redeem the mortgaged chattels. 5
preceding chapter, our knowledge of mortgages in general may not the sale shall be void upon the seller paying to the purchaser a Under this doctrine the purchaser at public auction of an
be complete without sufficient understanding of what a chattel sum of money or doing some other act named. If the condition automobile previously mortgaged acquired no more than the
mortgage is, the laws governing the same, and the form, extent is performed according to its terms the mortgage and sale im- mortgagors right of redemption as provided for in Section 13 of
and consequences thereof, especially as to its constitution, mediately becomes void, and the mortgagee is thereby divested Act No. 1508. The mortgagor had an attachable interest in the
modification and extinguish-ment. of his title.1 automobile which he had sold conditionally and that interest was
the right to redeem it by paying the balance due under the chat-
Hence, its treatment in the present chapter, though not es- On the other hand, the New Civil Code of the Philippines defines tel mortgage (conditional sale, Sec. 3, Act No. 1508).
sentially necessary for the purposes of the present work, will find a chattel mortgage with an apparently different view, as follows:
justification as an incidental feature. Besides, the office involved in But it should not be overlooked that the mortgagor has also
the registration of this kind of mortgage is the Registry of Deeds. Art. 2140. By a chattel mortgage, personal property is the right of possession. Thus, where a car was mortgaged, and
recorded in the Chattel Mortgage Register as a security for the then it was attached and levied on in a separate proceeding and
Laws governing chattel mortgages. performance of an obligation. If the movable, instead of being subsequently sold at public auction, the purchaser is entitled to
recorded, is delivered to the creditor or a third person, the con- take over the pos-session thereof, but only subject to the
Chattel mortgages are governed principally by Act No. 1508, tract is a pledge and not a chattel mortgage. mortgage lien. The mortgagee cannot insist that he settles the
otherwise known as the Chattel Mortgage Law, as amended. The mortgage obligation first, inasmuch as the purchaser merely
Civil Code does not supersede nor repeal the Chattel Mortgage Law, Before the adoption of the Civil Code embodying the foregoing steps into the shoes of the mortgagor who is entitled to the right
although it may serve the latter in a suppletory character. Thus, definition, our Supreme Court, cognizant of the fact that the defini- of possession before the mortgage shall have been foreclosed
whenever conflict should arise in the application of the Civil Code, tion in the Chattel Mortgage Law may not convey the right meaning and the car sold at public auction as a consequence thereof.6
the Chattel Mortgage Law as a special law on the subject should intended in this jurisdiction, proposed to define it in the following
prevail, and this is in consonance with the express provision of the wise: But, where the condition of the chattel mortgage as
Civil Code, which reads: registered prior to the levy on execution had been broken and
A chattel mortgage is a contract which purports to be, as the mortgagee already instituted an action for replevin to take
Art. 2141. The provisions of this Code on pledge, insofar in form is, a sale of personal property, intended as security for over the possession of the mortgaged property preparatory to
as they are not in conflict with the Chattel Mortgage Law, shall the payment of a debt, or the performance of some other obliga- the foreclosure sale, the mortgagee has a superior, preferential
be applicable to chattel mortgages. tion specified therein, upon the condition subsequent that such and paramount right to have the possession thereof and to claim
sale shall be void upon payment of the debt or performance of the proceeds of the execution sale under the attachment. The
In matters of recording chattel mortgages, the latest the specified obligation according to the term of the contract. 2 execution creditor could have levied only upon the right or equity
governing law is Presidential Decree No. 1529, particularly Sections of redemption pertaining to the mortgagor inasmuch as that is
114 to 116 thereof. In other words, and following our local tendency, we may define the only leviable or attachable property right of said mortgagor in
the true nature of a chattel mortgage as a sale only in form, while in the mortgaged property.7
Chattel mortgage, nature and meaning. substance essentially a contract of security.
Chattel mortgage.
At common law a chattel mortgage is a sale of personalty con- Thus, the mortgagee does not become the owner of the property
veying the title to the mortgagee under the condition that, if the mortgaged, the ownership remaining with the mortgagor, and conse- The accessory contract of chattel mortgage has no legal
terms of redemption are not complied with, then the title becomes quently, under the maxim: res perit domino suo, the mortgagor- effect whatsoever where the mortgagor is not the absolute owner
absolute in the mortgagee. Thus, according to Thomas on owner shall bear the loss of the thing mortgaged. Accordingly, where of the property mortgaged, ownership of the mortgagor being an
Mortgages, it is a transfer of personal property as security for a a warehouse receipt or quedan is transferred or endorsed to a credi- essential requirement of a valid mortgage contract. The
debt or obliga-tion in such form that, upon failure of the mortgagor tor, only to secure the payment of a debt, the transferee or endorsee manifestations of ownership are control and enjoyment over the
to comply with the terms of the contract, the title to the property does not automatically become the owner of the goods covered by thing owned. While there were documents, like the registration
will be in the mortgagee. Similarly, according to Jones on Chattel said receipt or quedan but merely retains the right to keep them and certificate, receipt and sales invoice that were signed, such were
Mortgages, it is a conditional sale of chattel as security for the with the consent of the owner (mortgagor) to sell them so as to merely parts of the process-ing and for the approval of their
payment of a debt or the performance of some other obligation. satisfy the obligation from the proceeds of the sale. 3 application to buy the subject motor vehicle.

42
Without such signed documents, no sale, must less delivery, foreclosure sale where it was the highest bidder. The Supreme Court and different from the owner of the land, it may be considered a
of the subject jeepney could be made. The documents were not said that the buyers title can only be challenged in a direct action. It personal property upon stipulation of the parties, for the purpose
therefore an acknowledgment by respondent spouses of the is well-settled that a certificate of title cannot be subject to collateral of constituting a chattel mortgage. So, also, where a building
physical acquisition of the subject motor vehicle but merely a attack and can be altered, modified or cancelled only in a direct erected on land belonging to another is merely superimposed on
requirement of petitioner so that the said subject motor vehicle proceeding in accordance with law. (Carreon vs. CA, 291 SCRA 78). the soil or is sold for immediate demolition, the same may be
would be delivered to them. The issuance of a sales invoice does Having obtained a valid title over the subject lot, petitioner is entitled considered as mov-able or personal property.10
not prove transfer of ownership of the thing sold to the buyer, an to protection against indirect attacks against his title. The lower
invoice is nothing more than a detailed statement of the nature, courts ruling on the matter, as stated in its decision, denying Thus, it was held that while a house is inherently real
quantity and cost of the thing sold and has been considered not a respondent banks prayer for reinstatement of its canceled titles property, a chattel mortgage executed on a house may be
bill of sale. without prejudice to the filing of proper action should thus stand. It perfectly valid, for it is now well-settled that an object placed on
is more in keeping with the purpose of the adoption of the Torrens land by one who has only a temporary right to the same, such as
The registration certificate signed by the respondent spouses system in our coun-try: a lessee or usufructu-ary, does not become immobilized by
does not conclusively prove that constructive delivery was made attachment.11 Hence, if a house belonging to a person stands on
nor that ownership has been transferred to the respondent The Torrens system was adopted in this country because a rented land belonging to another person, it may be mortgaged
spouses. Like the receipt and the invoice, the signing of the said it was believed to be the most effective measure to guarantee as a personal property if so stipulated in the document of
documents was qualified by the fact that it was a requirement of the integrity of land titles and to protect their indefeasibility mortgage.
petitioner for the sale and financing contract to be approved. In all once the claim of ownership is established and recognized. If a
forms of delivery, it is necessary that the act of delivery, whether person purchases a piece of land on the assurance that the In an actual case where it was sought to register a chattel
constructive or actual, should be coupled with the intention of sellers title thereto is valid, he should not run the risk of being mort-gage covering a house and the Register of Deeds refused to
delivering the thing. The act, without the intention, is insufficient. told later that his acquisition was ineffectual after all. This would admit same to record, our Supreme Court ruled that the duties of
The critical factor in the dif-ferent modes of effecting delivery which not only be unfair to him. What is worse is that if this were the Reg-ister of Deeds in respect to the registration of chattel
gives legal effect to the act, is the actual intention of the vendor to permit-ted, public confidence in the system would be eroded mortgages are purely of a ministerial character, and he is clothed
deliver, and its acceptance by the vendee. Without that intention, and land transactions would have to be attended by complicated with no judicial or quasi-judicial power to determine the nature of
there is no tradition. (Union Motor Corp. vs. CA, et al., 361 SCRA and not necessarily conclusive investigations and proof of the property, whether real or personal, which is the subject of
506). ownership. The further consequence would be that land conflicts the mortgage. Generally speaking, he should accept the
could even more numerous and complex than they are now and qualification of the property adopted by the person who presents
Inasmuch as there was neither physical nor constructive deliv- possibly also more abrasive, if not even violent. The the instrument for registration and should place the instrument
ery of a determinate thing (in this case, the subject motor vehicle), Government, recognizing the worthy purpose of the Torrens on record, upon payment of the proper fees, leaving the effects
the thing sold remained at the sellers risk. The petitioner should system, should be the first to accept the validity of the titles of registration to be determined by the court if such question
therefore bear the loss of the subject motor vehicle after Sosmea issued thereunder once the condi-tions laid down by the law are should arise for legal determination. Registration adds nothing to
stole the same. satisfied. (Tenorio-Obsequio vs. CA, 230 SCRA 550). the instrument, considered as a source of title, and affects
nobodys rights except as a species of constructive notice. 13
Ownership as a requirement of a chattel mortgage. Subject matter of chattel mortgage.
However, while the dicta in the decisions of the Supreme
The motor vehicle was never delivered to the buyers. They By express provision of Section 2 of Act No. 1508, as amended, Court14 and of the Court of Appeals 15 have tended to erode the
however executed a chattel mortgage over the car. The chattel only personal property may be subject of chattel mortgage. doctrine of
mort-gage has no effect. In Union Motors Corporation vs. CA, 361
SCRA 506, it was ruled that the accessory contract of chattel As a building is not as a rule a personal property, it was held Leung Yee vs. Strong Machinery Co., supra, and admitted the
mortgage has no legal effect whatsoever inasmuch as the that a chattel mortgage of a building, its inscription in the chattel validity of chattel mortgages on houses built on rented land, it is
mortgagors are not the absolute owners thereof, ownership of the mortgage registry, and the annotation of its sale under such chat-tel well to note that the cases mentioned were predicated on
mortgagor being an essential requirement of a valid mortgage mortgage, are each and ineffective to change its character. The statements by the owner declaring his house to be a chattel, a
contract. The manifestations of ownership are control and placing of the document on record in the chattel mortgage register, conduct that may conceivably stop him from subsequently
enjoyment over the thing owned. (Land Settlement and not being required by law, is a futile act. 8 So, also, a mortgage credi- claiming otherwise. They are not appli-cable to a case where no
Development Corp. vs. Carlos, 22 SCRA 202). tor who purchases real property at an extrajudicial foreclosure sale similar declaration or commitment can be attributed to the owner
thereof by virtue of a chattel mortgage constituted in his favor, which of the house who built it not as a mere lessee but occupied the
Direct attack on a title. mortgage has been declared null and void with respect to said real land under a valid contract that said land would be sold to him.
property, acquires no right thereto by virtue of said purchase. 9 Hence, for purposes of foreclosure or where such house was
A Torrens title can only be attacked directly. In Tan vs. Phil- object of levy and sale, it should be deemed to be real property,
ippine Banking Corporation, 355 SCRA 292, a parcel of land and a House as object of chattel mortgage. in which case, the publication in the newspaper of general
title was issued to him. The buyer relied upon the sellers title when circula-tion is indispensable where the assessed value thereof
he brought it as it was free from any liens, claims or The rule just enunciated above is not without exception under exceeds four hundred pesos, under Section 18 of Rule 39 of the
encumbrances. Later on, the bank questioned the title after the some special circumstances. If the owner of the building is distinct
43
Rules of Court; otherwise, the execution sale was void and cannot be object of a valid chattel mortgage. This is particularly true the weight of American authorities and it is the modern doctrine
conferred no title on the purchaser.16 if the owner of the machinery or fixture and the owner of the building of general acceptance by the court.26
or plant were they are installed or attached and the owner of the land
Likewise, a mortgage contract involving a house and the where the building is erected are one and the same person. On the Besides, although shares of stock of a corporation represent
lease-hold right over the land on which said house stands, duly other hand, if they are so placed by a tenant, or a usufructuary, or equi-ties that may consist of real as well as personal property
registered in the Registry of Deeds under Act No. 3344, is not a someone else having only a temporary right on the real property, therein, they are considered under applicable law and
chattel mortgage but a real estate mortgage, and the proceeding then they may be treated as movable property and made object of a jurisprudence as intangible personal property,27 and therefore
for its foreclosure is cognizable by the Court of First Instance. 17 valid chattel mortgage.21 may properly be subject of chattel mortgage.

Consistent with the same trend, it was held that the mere fact An interest in a business mortgageable if properly de-scribed. Growing crops as personal property.
that a house was the subject of a chattel mortgage and was
considered a personal property by the parties does not make said An interest in a business may be subject to chattel mortgage, for Growing crops, like ungathered sugar cane in the field, are
house personal property for purposes of notice to be given for its it is a personal property, being capable of appropriation, and not per-sonal property and as such may be subject matter of chattel
sale at public auc-tion. It remains real property within the purview included among the real properties enumerated in Article 334 (now mortgage. At common law all annual crops which are raised by
of Rule 39, Section 18, of the Rules of Court as it has become a 415) of the Civil Code. But the description of such chattel must be yearly manur-ance and labor and essentially owe their existence
permanent fixture on the land, which is real property. The sheriff is sufficient enough so as to enable the parties to the mortgage or any to cultivation may be levied on as personal property. As
therefore bound to advertise the auction sale of such property as other person to identify the same after a reasonable investigation or ungathered products, they have the nature of personal
he would have done so in the case of an execution sale of real inquiry. Thus, if the thing is described as the half interest of the property, at least for the purposes of the Chattel Mortgage Law.28
property.18 debtor in the drug business known as Antigua Botica Ramirez
(owned by a certain person therein named and the mortgagor) In the case of Lumber Co. v. Sheriff and Tax Collector,29 the
There seems in fact to be a growing tendency to withdraw located at Nos. 123 and 125, Calle Real, District of Intramuros, Supreme Court of Louisiana laid down the following ruling: True,
sanc-tion to a house being considered as proper subject matter of a Manila, P.I., the description meets the requirements of the law.22 by Article 465 of the Civil Code it is provided that standing crops
chattel mortgage. Thus, it was held that the view as above and the fruits of trees not gathered and trees before they are cut
enunciated that the parties to a deed of chattel mortgage may However, where the mortgaged property was described as 1. A down .
agree to consider a house as personal property, for purposes of store No. 79 on Magallanes Street, Municipality of Cebu, formerly
such a contract, shall be deemed good only insofar as the belonging to T. Thakurdas, with all merchandise, effects, wares, and . . are considered as part of the land to which they are attached,
contracting parties are concerned and is not applicable to strangers other bazaar goods contained in the said store. 2. A store No. 19 but the immovability provided for is only one in abstracto and
to the contract or to a case where there is no contract whatsoever on Real Street, Iloilo, Panay, P.I., formerly belonging to Guillermo without reference to rights on or to the crop acquired by others
with respect to the status of the house. 19 Consequently, the right Asayas, with all the merchandise, effects, wares and other bazaar than the own-ers of the property to which the crop is attached.
under such a chattel mortgage over a house may yield to that goods contained in the said store, it was held to be impossible of xxx. The existence of a right on the growing crop is a
under a real estate mortgage subsequently constituted in which identification, and the chattel mortgage considered not in order.23 mobilization by anticipation, a gathering as it were in advance,
such house was included as security, in spite of the prior rendering the crop movable quod the right acquired therein. Our
registration of the chattel mortgage. A house cannot be divested of On the other hand, Section 7 of Act No. 1508 does not demand jurisprudence recognizes the possible mobilization of the growing
its character as real property although the land on which it is a minute and specific description of every chattel mortgaged in the crop.
erected may belong to another, so that a chattel mortgage deed of mortgage but only requires that the description thereof be
executed covering said house is clearly invalid and a nullity, its such as to enable the parties in the mortgage, or any other person, Our Chattel Mortgage Law in its Section 7, paragraph 3, not
registration in the chattel mortgage register notwithstanding; and a after reasonable inquiry and investigation, to identify the same. only permits that growing crops be made subject of a chattel
mortgage creditor who purchases such real property at an Gauged by this standard, general descriptions have been held valid. 24 mortgage but even cautions that if growing crops be mortgaged
extrajudicial fore-closure sale thereof by virtue of a chattel the mortgage may contain an agreement stipulating that the
mortgage constituted in his favor acquires no right thereto by Shares of stock as security of an obligation. mortgagor binds him-self properly to tend, care for and protect
virtue of the sale as against third persons. the crop while growing, and faithfully and without delay to
Whether in this jurisdiction an equity in shares of stock may harvest the same, and that in default of the performance of such
Machinery and fixture as subject matter. properly be made the subject of a chattel mortgage was open to duties the mortgagee may enter upon the premises, take all the
ques-tion. But it was held that such chattel mortgage will at least necessary measures for the protection of said crop, and retain
Machinery and fixture are personal property by their very na- operate as a conditional equitable assignment valid between the possession thereof and sell the same, and from the proceeds of
ture, and there can be no question that as a rule they may be parties and third persons with actual notice. 25 such sale pay all expenses incurred in caring for, har-vesting, and
object of chattel mortgage. However, if they are attached to real selling the crop and the amount of the indebtedness or obligation
property or placed in a factory building or plant, with the character However, it is now considered that certificates of stock or of secured by the mortgage, and the surplus thereof, if any, shall be
of perma-nence according to their purpose and in such manner that stock dividends, under the Corporation Law, are quasi-negotiable paid to the mortgagor or those entitled to the same.
they cannot be detached therefrom without causing destruction of, instruments in the sense that they may be given in pledge or mort-
or material injury to, the things real with which they are connected, gage to secure an obligation. The question is settled in this wise by Vessels as subject matter.
they would be regarded as part of the real estate, and therefore
44
Vessels are considered personal property under the civil law. Where a copy of the deed of mortgage is furnished the Motor tion 7 above-quoted to stores open to the public for retail
Thus, Article 585 of the Code of Commerce provides that for all Vehicles Office, it is deemed that the legal requirement is substan- business where the goods are constantly sold and substituted
purposes of law vessels shall continue to be considered as personal tially complied with since the duty of entering such mortgage in the with new stock. Otherwise, it would defeat the purpose for which
property similarly under the common law, vessels are personal records is placed by law upon the chief of said office. 35 the law was enacted, that is, the promotion of business and the
prop-erty although occasionally referred to as a peculiar kind of economic development of the country.37
personal property.30 Since the term personal property includes It may not be amiss to state here that the registration of the
vessels, they are subject to mortgage agreeably to the provisions transfer of a car and of the certificate of license for its use in the In this connection, our Supreme Court cited with approval
of the Chattel Mortgage Law. Indeed, it has heretofore been Motor Vehicle Office (now Land Transportation Office) merely the views of Cobbey, a well-known authority on Chattel
accepted without discussion that a mortgage on a vessel is in constitutes an administrative proceeding which does not bear any Mortgages, read-ing as follows:
nature a chattel mort-gage. essential relation to the contract of sale entered into between the A mortgage may, by express stipulations, be drawn to
parties. However, a chattel mortgage of a car in order to affect third cover goods put in stock in place of others sold out from
The only difference between a chattel mortgage of a vessel persons should not only be registered in the Chattel Mortgage time to time. A mortgage may be made to include future
and a chattel mortgage of other personalty is that it is not now Registry but should also be recorded in the Land Transportation acquisitions of goods to be added to the original stock
necessary for a chattel mortgage of a vessel to be recorded in the Commission (now Land Transportation Office), as required by the mortgaged, but the mortgage must expressly provide that
office of the Register of Deeds, but it is essential that a record of Revised Motor Vehicles Law. such future acquisitions shall be held as included in the
documents af-fecting the title to a vessel be entered in the record mortgage. x x x Where a mort-gage covering the stock in
of the Collector of Customs at the port of entry.32 However, under To clarify the above requirements, Batas Pambansa Blg. 74, trade, furniture, and fixtures in the mortgagors store
the provision of Section 3 of Presidential Decree No. 1521, no approved June 11, 1980, amended Section 5 of Republic Act 4136, by provides that all goods, stock in trade, furni-ture and
mortgage, which covers a vessel of domestic ownership or any expressly providing that mortgages, attachments, and other encum- fixtures hereafter purchased by the mortgagor shall be
portion thereof, shall be valid against any third person other than brances of motor vehicles, in order to be valid against third persons, included in and covered by the mortgage, the mortgage
the mortgagor, his heirs and as-signs, and such other person must be recorded in the Land Transportation Office. Such voluntary covers all after-acquired property of the classes mentioned,
having actual knowledge thereof, until such mortgage is recorded in transactions or encumbrances shall also be properly recorded on the and, upon foreclosure, such property may be then and sold
the office of the Philippine Coast Guard of the port of face of all outstanding copies of the certificates of registration of the by the mortga-gee the same as the property in the
documentation of such vessel. Otherwise a mortgage on a vessel is vehicle concerned. The cancellation or foreclosure of such mortgages, possession of the mortgagor at the time the mortgage was
generally like other chattel mortgages as to its requisite and attachments, and other encumbrances shall likewise be recorded, and executed.38
validity. in the absence of such cancellation, no certificate of registration shall
be issued without the corresponding notation of mortgage, Large cattle as object of chattel mortgage; how
Motor vehicle when object of chattel mortgage. attachment and/or other encumbrances. described.

Under the provisions of Section 5 (e) of the Revised Motor Ve- Mortgage of after-acquired property valid. Large cattle includes the horse, mule, ass, carabao, or other
hicles Law, whenever any owner mortgages any motor vehicle as domesticated member of the bovine family.39
security for a debt or other obligation, the creditor or person in The problem of whether after-acquired property may be object
whose favor the mortgage is made is required, within seven days, of a chattel mortgage has confronted stores open to the public for Section 7 of the Chattel Mortgage Law provides that if the
to notify the Chief of the Motor Vehicles Office in writing to that retail business, where the goods are constantly sold and substituted prop-erty mortgaged be large cattle, the description thereof shall
effect, stating the registration number of the motor vehicle, date of with new stock from time to time. include the brands, class, age, knots of radiated hair commonly
mortgage, names and addresses of both parties, and such other known as remolinos, or cowlicks, and other marks of ownership
information as maybe required by said office. Such notice, which is In the construction of the provision of the last paragraph of as described and set forth in the certificate of ownership of said
to be signed, jointly by the parties to the mortgage, is likewise Section 7 of Act No. 1508, reading as follows: animal or animals, together with the number and place of issue
required upon termination, cancellation or foreclosure of mortgage. of such certificates of ownership.
And these notices as filed in the motor vehicle records serve as A chattel mortgage shall be deemed to cover only property
evidence of the true status of ownership of the motor vehicle. described therein and not like or substituted property thereafter Where to register chattel mortgage.
acquired by the mortgagor and placed in the same depository as
The recording provisions of the Motor Vehicles Law are the property originally mortgaged, anything in the mortgaged to As required by Section 114 of Presidential Decree No. 1529,
deemed to be complementary to those of the Chattel Mortgage the contrary notwithstanding. a chattel mortgage shall be recorded in the office of the Register
Law. Thus, it was held that a mortgage of any motor vehicle in of Deeds of the province or city where the mortgagor resides as
order to affect third persons should not only be registered in the our Supreme Court invoked the spirit and intent of the law, holding well as where the property is situated or ordinarily kept.
Chattel Mortgage Registry, but the same should also be recorded in that when said Act was placed in our statute books by the United However, this re-quirement of double registration does not seem
the Motor Vehicles Office, and that the failure of the mortgagee to States Philippine Commission on July 2, 1906, the primary aim of the mandatory, inasmuch as under an express proviso in subsequent
report the mortgage executed in his favor has the effect of making lawmaking body was undoubtedly to promote business and trade in Section 116, Subsection 2(e), of the same Presidential Decree,
said mortgage ineffec-tive against a purchaser in good faith who these Islands and to give impetus to the economic development of the registration of the chattel mortgage in the province where
registered his purchase in the Motor Vehicle Office. 34 the country, and, bearing this in mind, it could not have been the the property is situated is deemed sufficient registration. In
intention of the Philippine Commission to apply the provision of Sec-
45
effect, the same rule as provided in Section 4 of the Chattel entered in the Day Book, in the strict order of their presentation,
Mortgage Law, as amended by Republic Act 271, still governs. chat-tel mortgages and other instruments relating thereto, and this As to the proper time to register a chattel mortgage, the
act constitutes the primary process. Thereafter he causes to be Civil Code does not provide any specific time within which this
Where the object of a chattel mortgage is a vessel, entered in a more detailed form the essential contents of the should be accomplished. It was thus held that where the
registration thereof in the office of the Register of Deeds is not instrument in the Chattel Mortgage Register, and this latter act registration thereof is made by the mortgagee before the
even required. What is legally essential is its registration in the constitutes the complementary process. mortgagor has complied with his principal obligation and no right
record of the Col-lector of Customs at the port of entry,40 and now of innocent third person is preju-diced, the law requiring
at the office of the Philippine Coast Guard at the port of It is to be noted that when a party in interest has presented his registration is substantially and sufficiently complied with
documentation of such ves-sel.41 instrument and paid in full the registration fees required by law, and inasmuch as it does not intend that its provisions be used as a
such instrument has been duly entered in the Day Book of the Chattel shield to avoid performance of an obligation under what would
Thus, with respect to recording of documents affecting title to Mortgage Register, nothing more is to be done by such private party. otherwise be a valid contract.
vessels, Republic Act No. 1937, otherwise known as the Tariff and What remains to be done is incumbent upon the government, thru the
Customs Code of the Philippines, provides in Section 805, as fol- Registrar to perform. Such being the case, it is believed that, insofar Effect of registration.
lows: as the registrant is concerned, registration should be deemed
sufficient, even if the complementary process thereof has not yet While registration adds nothing to the instrument,
SEC 805. Record of Documents Affecting Title. In the been actually accomplished; the party in interest should thereupon be considered as the source of title of the mortgagee, it operates as
record of transfers and encumbrances of vessels, to be kept at entitled to the full protection of the law. For if the Registrar thru a constructive notice of the existence of the chattel mortgage.
each principal port of entry, shall be recorded at length all negligence should fail to give immediate course to this The transaction thereby becomes binding against third persons.
transfers, bills of sale, mortgages, liens or other documents complementary process in registration, the blame therefor cannot be
which evidence ownership or directly or indirectly affect the attributed to a private individual who under the presumption of An otherwise invalid or legally defective document is not
title of registered vessels and therein shall be recorded all regularity has the right to expect that the duty imposed by law upon validated or cured of its legal defects by registration. For
receipts, certificates or acknowledgment cancelling or the government has been performed accordingly. instance, a chattel mortgage contract entered into by a public
satisfying, in whole or in part, any such obligations. No other service corporation is ineffective without the authorization and
record of any such document or paper shall be required than We are not unmindful of a decisions 44 of the Court of Appeals approval of the Public Utility Commission (now Public Service
such as is effected hereunder. holding that mere inscription or entry in the Day Book is not sufficient Commission), and remains so even if registered with the office of
and that for a chattel mortgage to be considered as such the deed of the Register of Deeds. But the moment all the material and
Where the subject matter of a chattel mortgage consists of mortgage must be recorded also in the Chattel Mortgage Register. It formal requisites demanded by law for its validity are complied
shares of stock, the registration thereof in the office of the seems that in said decision it was not considered that the Day Book is with, the Public Service Commission may make it retroactive by
corporation is not necessary and has no legal effect, inasmuch as a complementary part of the Chattel Mortgage Register, for if it were nunc pro tunc authorization and approval.48 Incidentally, it may
the transaction does not involve transfer of ownership but as mere it can readily be seen that whatever is entered in such Day Book may be stated here that the approval by the Public Service
security.42 be deemed recorded in the Chattel Mortgage Register. This view, it is Commission of chattel mortgages involving public conveyance is
submitted, does not in any way deviate from the provisions of Article necessary only when the mortgage or encumbrance is for
As to where the property represented in the shares of stock is 1240 of the new Civil Code or even Section 15 of the Chattel liabilities of more than one year maturity.49
situated, there have been conjectures. The situs of shares of stock Mortgage Law. By way of demonstrating that the two books are linked
for some purpose may be at the domicile of the owner, and for together, which is as true of the journal and the ledger in accounting, Mortgage binding on subsequent purchasers.
others at the domicile of the corporation; and even elsewhere. for the purpose of determining priority between two documents
However, for the purposes of Section 4 of Act No. 1508, it was held registered in the Chattel Mortgage Register proper, their respective Instruments of mortgage are binding, while they subsist,
that the property in the shares may be deemed to be situated in entries in the Day Book must be consulted for the answer. Thus, not only upon the parties executing them but also upon those
the province in which the corporation has its principal office or registration in the Chattel Mortgage Register, although actually who later, by purchase or otherwise, acquire the mortgaged
place of business. In this sense the property mortgaged is not the accomplished at a much later date, takes effect retroactively as of the properties. The right of those who so acquire said properties
certificate but the participation and share of the owner in the assets date of the entry in the Day Book of the Chattel Mortgage Register. should not and cannot be superior to that of the creditor who has
of the corporation.43 in his favor an instrument of mortgage executed with the
However, in a subsequent decision of the Court of Appeals, 45 it formalities of the law, in good faith, and without the least
Sufficiency of registration. finally realized that the weight of authority is to the effect that the indication of fraud. In a decided case, the pur-chaser of an
filing of the chattel mortgage at the proper office and with the proper automobile knew or at least was presumed to know, by the mere
For the purpose of recording chattel mortgages in accordance officer, although the officer did not make the proper recording thereof, fact that the mortgage was registered in the office of the Register
with Act No. 1508, otherwise known as the Chattel Mortgage Law, operates as a constructive notice to subsequent purchasers, 46 and of Deeds, that said property was subject to a mortgage lien. In
the Register of Deeds carries a set of books, namely, Day Book of accordingly held that where the instrument of chattel mortgage was purchasing it, with full knowledge that such circumstances
Chattel Mortgage Register (Judicial Form No. 77) and Chattel not only delivered to the office of the Register of Deeds but also existed, it should be presumed that he did so, very much willing
Mortgage Register (Judicial Form No. 51), and in order to facilitate entered in the Day Book, such entry is for all intents and purposes to respect the lien existing thereon, since he should not have
public inspection of such records he further carries an index system notice to all concerned that a lien or encumbrance has been created expected that with the purchase he would acquire a better right
on Judicial Form No. 50. To accomplish registration, he causes to be upon the chattel so mortgaged. than that which the vendor then had.
46
constituted, that the document in which it appears to be recorded in Court of Appeals has taken the position that Section 4 of the
The chattel mortgage lien attaches to the property wherever it the Registry of Property. If the instrument is not recorded, the Chattel Mortgage Law shall be deemed to be modified by Article
may be; hence, the buyer acquires the property subject to such mortgage is nevertheless binding between the parties.56 2140 of said Code, thereby giving full force and effect to the
liens and encumbrances as existed at the time of the execution precept that if the movable, instead of being recorded, is
sale.51 But, supposing that while such chattel mortgage remains un- delivered to the creditor or to a third person, the contract is a
registered, the chattel given as security was delivered to and retained pledge and not a chattel mortgage.57
Sale of chattel without consent of mortgagee. by the creditor, what will be its effect? Will it be a chattel mortgage or
a pledge? On the other hand, the same Court ruled in a subsequent
While a mortgagor of real estate may sell the mortgaged case that knowledge of an unregistered chattel mortgage is
prop-erty even without the consent of the mortgagee, the rule is If we look at it from the standpoint of Article 2140 of the New equivalent to registration. Thus, it was held that the actual
not true in the case of a chattel mortgage. Under the provisions of Civil Code, as the movable instead of being recorded has been deliv- knowledge by a vendee that the chattel sold to him has been
Article 319, paragraph 2, of the Revised Penal Code, any mortgagor ered to the creditor, it would seem to be a pledge and not a chattel previously mortgaged to another is equivalent to registration.
who shall sell or pledge personal property already pledged or mortgage. But that notwithstanding, if the description of the thing Whatever right may have been acquired by said vendee by virtue
mortgaged under the Chattel Mortgage Law, without the consent of given and the date of the delivery do not appear in a public instru- of the sale in his favor is subject to the superior lien of the
the mortgagee writ-ten on the back of the mortgage and noted on ment, as required by Article 2096, it cannot be a pledge insofar as mortgagee although unrecorded at the time of the sale. 58 It is
the record thereof in the office of the Register of Deeds of the third persons are concerned. On the other hand, viewing it from the observed here that the Court did not regard the unrecorded
province or city where such property is located, incurs criminal standpoint of Section 4 of the Chattel Mortgage Law, even if the chattel mortgage as a pledge.
responsibility. A mere stipulation in the deed of sale that it revokes description and the date of delivery do not appear in a public instru-
the chattel mortgage and quashes, nullifies and terminates all ment, there being actual delivery, it would still be a chattel mortgage, Affidavit of good faith; effect of omission.
proceedings, judicial or extrajudicial, arising out of and incident to good and effective as against third persons. Thus, it would appear
the transaction, does not and cannot have the effect of wiping out that the Chattel Mortgage Law, if invoked under the circumstances, The Chattel Mortgage Law in its Section 5 describes an
the criminal liability. And this is true even in those cases where the could offer a better protection than the Civil Code, and the aim of affidavit of good faith, in the following form:
purchaser or pledgee has knowledge of the fact that the things he both laws is to protect the rights of the creditor who needs it more.
bought or accepted as security for a loan are encumbered by a But, for the purposes of determining how strong is the position of the We severally swear that the foregoing mortgage is
prior loan, for the seller or pledgor is criminally responsible where creditor who invokes the Chattel Mortgage Law, a question may made for the purpose of securing the obligation specified in
he sells or pledges the chattel without the written consent of the incidentally crop up, and that is: Which of the two laws should prop- the con-ditions thereof, and for no other purpose, and that
first mortgagee. erly apply, or in case they come into conflict, which should prevail? In the same is a just and valid obligation, and one not entered
such a predicament it may suffice to call attention to the fact that the into for the purpose of fraud.
Government lien superior to mortgage lien. provisions of the Civil Code on pledge seem to be subordinate to the
Chattel Mortgage Law and may only apply to chattel mortgages if and This affidavit is required to be appended to such mortgage and
Taxes due the government are preferred and superior to the when they do not come in conflict with the latter law, Article 2141 of re-corded therewith.
mortgage lien. Thus, where it has been established that the the new Civil Code providing that its provisions on pledge, only
properties covered by plaintiffs mortgages and which were sold by insofar as they are not in conflict with the Chattel Mortgage Law, shall When a corporation is a party to such mortgage the
the provincial government of Leyte at public auction were used by be applicable to chattel mortgages. affidavit required may be made and subscribed by a director,
the defendant in the business or occupation on which the trustee, cash-ier, treasurer, or manager thereof, or by a person
merchants sales tax had been assessed against him, the lien of the From the foregoing discussion, we may draw the conclusion that, authorized on the part of such corporation to make or to receive
government on said properties is held to be superior to the in case of failure to register, the chattel mortgage remains valid but such mortgage. When a partnership is a party to the mortgage
mortgage lien of the plaintiff. only as against the mortgagor; but that, if the thing given in the affidavit may be made and subscribed by one member
mortgage has been delivered to the creditor, the chattel mortgage thereof.59
Effect of failure to register. extends its binding effect to third persons in spite of lack of
registration. How-ever, where the description of the property and date The absence of such affidavit vitiates a mortgage as against
Where there exists a chattel mortgage contract in due form, of delivery appear in a public instrument, and there was no chattel creditors and subsequent encumbrancers. 60 As a consequence a
but for some reason or another it was not, as it should be, mortgage contract executed, only then may we properly treat it as a chat-tel mortgage of a vessel wherein the affidavit of good faith
registered in the office of the Register of Deeds concerned, the pledge, and not a chattel mortgage good and valid against third required by the Chattel Mortgage Law is lacking is unenforceable
effect would be that it still remains a valid chattel mortgage as persons. For how can there be a chattel mortgage when there exists against third persons.61
against the mortgagor, his executors or administrators, 54 but void no document to that effect? But one thing should not be overlooked,
as against third persons, such as intervening purchasers or and that is, the provi-sions of the Civil Code on pledge cannot apply A chattel mortgage may, however, be valid as between the
creditors claiming liens by at-tachment, judgment or execution. 55 to chattel mortgages where to do so will conflict with the Chattel par-ties without such affidavit of good faith. In fact it does not
Article 2125 of the Civil Code clearly provides that the non- Mortgage Law. even have to be acknowledged before a notary public or
registration of the mortgage does not affect the immediate parties. evidenced by a public document.
It states: Art. 2125. In addition to the requisites stated in Article We are not unmindful of the fact, however, that in spite of the
2085, it is indispensable, in order that a mortgage may be validly provision of Article 2141 of the New Civil Code above discussed, the
47
Effect of increase of security; chattel mortgage to
secure fu-ture debts, void. Redemption right of junior mortgagee and attaching credi- The provisions of Rule 68 of the New Rules of Court relative
tor. to foreclosure of real estate mortgages are now made expressly
The increase of a mortgage security becomes a new mortgage applica-ble to judicial foreclosure of chattel mortgages, except
in itself where the original mortgage does not contain any When the condition of a chattel mortgage is broken, the mort- that the sale of the mortgaged property shall be held as provided
stipulation in regard to the increase of the mortgage credit, and, gagor or person holding a subsequent mortgage, or a subsequent at- by the Chattel Mortgage Law and without prejudice to the
even if it does, said increase would take effect only from the date of taching creditor may redeem the same by paying or delivering to the provisions of Articles 1484, 1485 and 1486 of the Civil Code
the increase. A mortgage which contains a stipulation in regard to mortgagee the amount due on such mortgage and the reasonable relating to chattel mortgages constituted in connection with sales
future increases of credit will take effect from the date the same costs and expenses incurred by such breach of condition before the on installment basis.72
are made and not from the date of the original mortgage. This sale thereof. An attaching creditor who so redeems shall be
principle is especially true in the case of chattel mortgage, where subrogated to the rights of the mortgagee and entitled to foreclose Of course, the embodiment of the real estate mortgage and
the law provides that the parties thereto must take an oath of good the mortgage in the same manner that the mortgagee could foreclose the chattel mortgage in one single document does not fuse both
faith to the effect that the debt or obligation secured thereby is a it by terms of the law.67 securities into one indivisible whole, and, therefore, the
just debt or obligation, hon-estly due and owing from the mortgagee may fore-close the real estate mortgage and waive
mortgagor to the mortgagee, and not one entered into for the After a first mortgage has been executed by the mortgagor, the chattel mortgage and maintain instead a personal action for
purpose of fraud. Hence, it is obvious that a chattel mortgage what remains with him is a mere right of redemption, and only this the recovery of the balance of the credit.73
cannot be made to secure a future debt.63 right passes to the second mortgagee when a second mortgage is
executed. It was held therefore that as between the first and second However, where there is no allegation in the complaint nor
Registration of assignment of mortgage. mortgages, the second mortgagee has at most only the right to does the deed of mortgage show that the mortgaged property is
redeem, and even when the second mortgagee goes through the valued at more than P10,000 and the amount of the demand
While an assignment of real estate mortgage is required by formality of a foreclos-ure, the purchaser acquires no more than the does not exceed said figure, exclusive of interest and costs, the
law64 to be registered in order that it may take effect upon the title right of redemption from the first mortgagee. case comes within the jurisdiction of the Justice of the Peace or
to the property, the rule used to be otherwise in the case of an Municipal Court.74
assignment of chattel mortgage. With respect to the registration of Foreclosure of chattel mortgage; condition precedent.
an assignment of chattel mortgage, it was held that the Chattel Procedure in foreclosure of chattel mortgage.
Mortgage Law was only permissive and not mandatory, and that an Before foreclosure may be resorted to, it is necessary as a
inscription of an assignment of chattel mortgage in the office of the condi-tion precedent that there be a violation of the condition of the The procedure prescribed in Section 14 of the Chattel
Register of Deeds did not operate as constructive notice to third chat-tel mortgage and that at least thirty days shall have elapsed Mortgage Law for the foreclosure of chattel mortgage may be
persons, such as, the mortgage debtor who was not a party to the since then.69 outlined as fol-lows:
contract of assignment; and that where the debtor paid the original
creditor, before having actual knowledge of assignment, he should Alternatives in foreclosure. 1. Notices are posted for at least ten days in at least two
be released from the ob-ligation in accordance with Article 1626 of public places in the municipality where the mortgaged
the Civil Code.65 Foreclosure may be carried out extrajudicially in accordance with property is to be sold, designating the time, place, and
the procedure outlined in Section 14 of the Chattel Mortgage Law, purpose of the sale.
However, it is to be borne in mind that according to the latest unless the mortgagee elects to institute an ordinary action in court,
amendments to the Chattel Mortgage Law it has now become the instead, to recover the indebtedness, with right to execute the 2. The mortgagee, his executor, administrator or assign,
duty of the Register of Deeds to record in the registration book for judgment thereon upon all the properties of the debtor, including the notifies in writing, at least ten days before the sale,
chattel mortgages not only a chattel mortgage and the discharge subject matter of the mortgage. In the later event, if the creditor the mortgagor or person holding under him and other
thereof but also an assignment and such other instruments relating should fail to obtain a favorable judgment, he will be precluded from persons holding subsequent mortgages of the time
to the recorded mortgage.66 pursuing the further remedy he has waived. The mortgage lien on the and place of the sale, said notice to be delivered
chattels is deemed abandoned.70 personally to the party if residing in the same
Cancellation of chattel mortgage. municipality or sent by mail if resid-ing outside.
However, where the mortgagor refused to deliver possession of
Upon settlement of the principal obligation secured by the the mortgaged property, the mortgagee cannot take the law into his 3. The mortgaged property is sold at public auction by a
chat-tel mortgage, the mortgagee is required to execute a own hands and wrest the property violently from the possession of public officer at a public place in the municipality
discharge of the mortgage in the manner provided by law. In case the mortgagor. Neither can he do thru the medium of a public of-ficer, where the mortgagor resides or where the property is
of his failure to do so, within ten days after being requested by the such as the sheriff, that which he cannot directly do himself. The situated, as designated in the notice.
mortgagor or any other person entitled to redeem, the mortgagee consequence is that in such case the creditor must either resort to a
may be held liable for his negligence as well as for all damages civil action to recover possession as a preliminary to a sale, or 4. Within thirty days after the sale, the public official who
occasioned thereby in an action in any court having jurisdiction preferably he may bring an action to obtain a judicial foreclosure in conducted the sale makes a return of his doings, the
over the subject matter thereof, as provided by Section 8 of the conformity, so far as practicable, with the provisions of the Chattel same to be filed and recorded with the Office of the
Chattel Mortgage Law. Mortgage Law.71 Register of Deeds where the mortgage has been
48
recorded. The officers return describing the articles sold chosen to exact the fulfillment of the obligation, he may enforce liable therefor? It is submitted that the guarantor under the
and stating the amount received for each article operates execution of the judgment rendered in his favor on the personal and circumstance may not be held liable to pay the deficiency
as a discharge of the lien created by the mortgage. real properties of the vendee not exempt from execution sufficient to because if he should be compelled to pay such deficiency or the
satisfy the judgment.77 balance of the purchase price, the guarantor will in turn be
5. The proceeds of the sale will be distributed and applied entitled to recover what he has paid from the debtor, so that
to the following payments: The law on this point has been made clear by Articles 1484 and ultimately it will be the vendee who will be made to bear the
1485 of the New Civil Code of the Philippines, reading as follows: payment of the balance of the purchase price, despite the earlier
Cost and expenses of keeping and sale; foreclosure of the chattel mortgage given by him. Thus, the
ART. 1484. In a contract of sale of personal property the protection given him by Article 1484 of the Civil Code would be
Amount of demand or obligation secured by the chat-tel price of which is payable in installments, the vendor may exer- indirectly subverted, and public policy overturned. 80
mortgage; cise any of the following remedies: Place of auction sale.

Obligations due to persons holding subsequent mort- (1) Exact fulfillment of the obligation, should the vendee fail to While the law designates the place where the auction sale of
gages, in their order, and pay; the mortgaged chattel may take place, namely, at a public place
in the municipality where the mortgagor resides or where the
Balance turned over to the mortgagor or person hold- (2) Cancel the sale, should the vendees failure to pay cover property is situated, it has been held that such sale may be held
ing under him on demand. two or more installments; somewhere else, provided that the owner thereof consents
thereto or that there is an agreement to that effect between the
Act 3135 not applicable to foreclosure of chattel mortgage. (3) Foreclose the chattel mortgage on the thing sold, if one has mortgagor and the mortgagee. This ruling is based upon the
been constituted, should the vendees failure to pay cover legal principle that a person may waive any right conferred upon
When the undertaking executed by and between the two or more installments. In this case, he shall have no him by law, unless such waiver is prohibited or is not authorized
mortgagor and the mortgagee is a chattel mortgage, and not a real further action against the purchaser to recover any unpaid by law because it is against public interest or prejudicial to a
estate mort-gage, it is a mistake for the mortgagee to request the balance of the price. Any agreement to the contrary shall third person.81
sheriff, under Act No. 3135, as amended by Act No. 4118, to sell be void.
extrajudicially the house subject of the mortgage in order to secure The parties may also agree to have the property sold at the
full satisfaction of the indebtedness owed by the mortgagor, ART. 1485. The preceding article shall be applied to con- resi-dence of the mortgagor, in which event the mortgagee has
specially when the house is of mixed materials which by its very tracts purporting to be leases of personal property with option to no power and authority to select from among the places provided
nature is considered as personal property. Act No. 3135, as buy, when the lessor has deprived the lessee of the possession for in the law and the place designated in their agreement, over
amended, covers only real estate mortgages and is intended merely or enjoyment of the thing. the objection of the mortgagor.82
to regulate the extrajudicial sale of the prop-erty mortgaged if and
when the mortgagee is given a special power to sell or express It is quite clear that under the above-quoted provisions of law On the other hand, where the mortgagee removes the
authority to do so in the deed itself or in a document annexed foreclosure of the chattel mortgage and recovery of the unpaid mortgaged chattel to another province, without the consent of
thereto. Chattel mortgages are covered and regulated by the balance of the price are alternative remedies, not cumulative, and the mortgagor, and there causes it to be sold, although there has
Chattel Mortgage Law (Act No. 1508). Section 14 of this Act allows may not be pursued conjunctively. Thus, by having seized the truck been publication of notice in the municipality where the sale is
the mortgagee to have the property mortgaged sold at public sold on installment basis and foreclosed the mortgage, the vendor effected, the mortgagee in effect unlawfully converts the
auction through a public officer, although in almost the same renounced whatever claim he may have under the promissory note, property and is liable to the mort-gagor for its full value. 83 The
manner as that allowed by Act No. 3135, as amended by Act No. and consequently he has no more cause of action against the promis- mortgagee has no right to appropriate for himself the property
4118, provided that the requirements of the law relative to notice sor and the guarantor, if any.78 But where the buyer on installment nor can he make payment by himself and to himself for his own
and registration are complied with. 75 It is not necessary that a basis and mortgagor has defaulted and the action instituted by the credit with the value thereof, because he is only permitted to
power of attorney with a special power to sell be inserted in a mortgagee is for specific performance and the mortgaged property is recover his credit from the proceeds of the sale at public
chattel mortgage instrument in order that such mortgage may be subsequently attached and sold, the sale thereof does not amount to auction.84
foreclosed extrajudicially. a foreclosure of the mortgage; hence, the seller-creditor is entitled to
deficiency judgment.79 May deficiency in proceeds from foreclosure sale be
Sale by installment secured by chattel mortgage; remedies recov-ered?
in case of default. Suppose aside from the chattel mortgage constituted by the
vendee in connection with a sale on installment basis, there was a It has been held that in case of deficiency in the foreclosure
In a sale of personal property on the installment plan, the guarantor to secure full payment, and the vendor as mortgagee, in- of a chattel mortgage arising not from a sale on installment basis
ven-dor may elect to exact the fulfillment of the obligation if the stead of exacting fulfillment of the obligation, has chosen to foreclose an independent action may be instituted for the recovery of said
vendee defaults, or cancel the sale, or foreclose his mortgage if one the chattel mortgage, and it resulted that the proceeds of the sale are deficiency. The fact that Act No. 1508 permits a private sale,
has been given on the property so sold. If he elects to cancel or not sufficient to cover the obligation. Of course, the mortgagee has no such sale is not, in fact, a satisfaction of the debt, to any greater
foreclose he is bound by the provisions of Article 1454-A (now 1484 recourse to recover the deficiency from the mortgagor under Article extent than the value of the property at the time of the sale. The
and 1485) of the Civil Code.76 Where the vendor, however, has 1484, sub-paragraph 3 of the Civil Code. May the guarantor be held amount received at the time of the sale, of course, is only a
49
payment pro tanto, which stands to reason why an action may be regardless of whether the proceeds thereof are sufficient or not
maintained for a deficiency in the debt. To deny to the mortgagee (Article 2115), a rule of similar pattern is found also in Article 1484 of
the right to maintain an action to recover the deficiency after the the same Code but only in relation to a chattel mortgage constituted
foreclosure of the chattel mortgage would be, according to that upon personal property purchased on install-ment basis precluding
ruling, to overlook the fact that the chattel mortgage is only given the mortgagee to maintain any further action against the debtor for
as a security and not as payment for the debt in case of failure of the purpose of recovering whatever balance of the debt secured, and
payment.85 even adding that any agreement to the con-trary shall be null and
void. Again, it is a well-settled rule that if a mortgagee elects as he
While the philosophy of the foregoing doctrine seems to be may do to waive the foreclosure of the chattel mortgage and bring,
sound enough, the conclusion arrived at may be open to question in instead, an ordinary action in Court to recover the debt with the right
the light of Article 2115 of the new Civil Code, relating to pledge, to execute the judgment on all the properties of the debtor including
which provides, among other things, that if the price of the sale is the chattel mortgaged, and he should fail in the remedy by him so
less, neither shall the creditor be entitled to recover the deficiency, elected, he utterly fails.88 Conversely, it would seem that where the
notwithstanding any stipulation to the contrary. mortgagee elects to foreclose the mortgage and he fails, he can no
longer pursue the other remedy of maintaining a separate action to
It is to be observed, in this connection, that the Chattel Mort- recover. Thus, it should be a matter of exercising a sound judgment in
gage Law is silent on such question of deficiency and for that the choice of the most appropriate remedy under the circumstances.
reason it would seem that the aforementioned Article 2115 on To allow the foreclosure of a chattel mortgage and the subsequent
pledge may properly be applied to chattel mortgages. It is so separate action in court for the recovery of the deficiency would seem
provided in Article 2141 of the same Code that the provisions of to be violative of an old maxim nemo debet bis vexari pro una et
this Code on pledge, insofar as they are not in conflict with the cadem causa (no man shall be twice vexed for one and the same
Chattel Mortgage Law, shall be applicable to chattel mortgages, cause).
and no distinction is made between an ordinary chattel mortgage
and one constituted in con-junction with sale payable in An analysis of the previous decisions 89 of the Supreme Court
installments. The only way to escape the application therefor is permitting the maintenance of a separate action in case deficiency in
where we can show that the Civil Code conflicts with the Chattel the proceeds of the sale in foreclosure of chattel mortgage will reveal
Mortgage Law. But the two laws seem to get along together well the fact that the conclusion had to be arrived at in order that a chattel
enough on this question of deficiency when the Supreme Court held mortgage which is a contract of security may not be treated wrongly
that it is the actual sale of the mortgaged chattel in accordance as a sale of personal property. But we cannot fail to observe that, ac-
with section 14 of Act No. 1508 that would bar the creditor (who cording to the present trend as evident in the existing legal provisions
chooses to foreclose) from recovering any unpaid balance. 86 on pledge as well as on chattel mortgage constituted to guarantee the
price of personal property purchased on the installment basis, the
We are not unmindful, however, of the more recent decision of recovery of any deficiency after the foreclosure sale is expressly
the Supreme Court to the effect that an action may be maintained prohibited under any circumstance. Obviously, in both transactions we
for the recovery of deficiency in the debt secured in case a chattel do have contracts of security, and not of sale, and yet no further
mortgage has been foreclosed and a deficiency exists. It is recourse is given to the creditor who chooses to foreclose.
assumed that the provision of Article 2115 of the New Civil Code on oOo
pledge, providing that the sale of the thing pledged extinguishes
the obliga-tion, regardless of whether the proceeds thereof are
sufficient or not, is deemed to be in conflict with the Chattel
Mortgage Law, and that under Article 2141 of the said Code in case
of such conflict the Chattel Mortgage Law should prevail. 87

By way of comment and with all due respect to the more


recent ruling referred to in the preceding paragraph, however, it
may be worth observing that the decision did not point out where
the conflict between the Civil Code and the Chattel Mortgage Law
exactly lies on the matter of recovering deficiency after the
foreclosure sale of the mortgaged chattel. It may be repeated here
that the Chattel Mortgage Law is silent on that point. On the other
hand, besides the Civil Code providing in the case of pledge that
the sale of the thing pledged shall extinguish the obligation
50
Chapter XIII P.D. 1529, that is, by filing with the Register of Deeds the instrument make regis-tration. It is true that it is the act of registration that
LEASES creating the lease and by a brief memorandum made by this official conveys and affects the land; but this does not mean that before
upon the certificate of title signed by him. A lessees duplicate cer- registration the lease is inoperative or not binding between the
Lease in general. tificate may be issued to the lessee, if desired in the same way and parties themselves. As to them, the lease is a perfect contract
under similar conditions that a mortgagees duplicate is issued. 5 This and may be enforced by one against the other, but without
Under the Civil Code of the Philippines, a contract of lease practice of issuing such additional certificates has been discontinued prejudice to the rights of third persons who had no notice of the
may be of things, or of work and service (Article 1642). In the by P.D. 1529. unregistered lease. In other words, the law did not mean to
present chapter, however, we shall deal only with lease of things, make the act of registration an essential requisite for the validity
such as real estate. A contract of lease or sublease of real estate should be in writ- of the contract of lease, but has only intended it as a protection
ing so that it may be registered and thereby be binding upon third for innocent third persons.10
The nature of a contract of lease is concisely defined by Article persons.6
1643 of the Civil Code in the following tenor: In the lease of Registration of lease, upon whom incumbent.
things, one of the parties binds himself to give to another the
enjoyment or use of a thing for a price certain, and for a period Lease affecting property previously mortgaged in spite of While the lease is registrable, the law does not make it the
which may be definite or indefinite. However, no lease for more stipulation against subsequent encumbrance. duty of the lessor to register it. It is for the lessee to ask for such
than ninety-nine years shall be valid. registration, if he wants to protect his leasehold, and the
In a case where real property was previously mortgaged, the document of lease operates as evidence of authority to the
In this connection, it is also well to understand the implication mortgage stipulating that the owner could not sell, assign or en- Registrar to effect the registration.11
of landlord and tenant. As a joint term it indicates a legal relation cumber the mortgaged property without the written consent of the
ex-isting between the lessor and the lessee, which relation is mortgagee, the owner subsequently executed a lease contract Does lease of real estate create real rights?
contractual and initiated by a lease agreement for a period which covering the same property. When the contract of lease was
may he either express or implied. By the lease agreement, presented to the Office of the Register of Deeds for registration, the If it does not, then it cannot be registered, for only real
possession is delivered to the tenant or lessee, and the latter, who mortgagee refused to surrender the certificate of title and objected to rights are susceptible of registration in the Registry of Deeds. As
is under obligation to pay rent for the right of use or occupation of the registration on the ground that such contract violated the to whether or not a lease creates a real right in favor of the
the property, acknowledges at all times the title thereto of the prohibition regarding subsequent encumbrance of the same property. lessee, Manresa had the following to say:
landlord or lessor. In passing upon the propriety of the registration of the lease, the
court held that in spite of the prohibition contained in the contract of From study of the preceding and the actual state of
Assignment of lease and sublease distinguished. mortgage, the subsequent lease of the property may still be leg-islation, we are led to the conclusion that, in our law,
registered, without prejudice to the right to foreclose the mortgage in the right created in favor of the lessee by reason of the
In an assignment of lease, the lessee makes an absolute view of the alleged violation. The mere registration of the lease will contract is, as a general rule, personal in nature; and by
transfer of his interest as such lessee, thus disassociating himself not operate to destroy the mortgage rights. In elaborating on this exception, real, when it is among the cases provided for in
from the original contract of lease, so that his personality point, the court states that the purpose of registering an instrument is article 2, No. 5, of the Mort-gage Law that is, when the
disappears and there remains only in the juridical relation two to give notice thereof to all persons; 7 it is not intended by the lease is for a period exceeding six years, or when the rent
persons, the lessor and the assignee who is converted into a proceedings for registration to seek to destroy or otherwise affect for three years is paid in advance, or when there is an
lessee; whereas, if he retains a reversionary interest, however already registered rights over the land, subsisting or existing at the express covenant for its inscription in the registry of deeds,
small, the transfer is deemed a mere sublease.1 time of the registration. The rights of the parties, which have been which are the only three cases in which the lease is
registered, are not put in issue when an instrument is subsequently registrable.12
A mere sublessee, however, cannot invoke any right superior presented for registration; nor are its effects on other instruments
to that of the sublessor or the direct lessee, and the transfer of previously registered put in issue by the procedure of registration. 8 From the foregoing authority, it can be gleaned that, in
physi-cal possession of the leased premises to a sublessee or a general, with respect to land registered under the Spanish
privy of the latter does not affect the lessors right to evict him It may be stated here, however, that in a more recent decision Mortgage Law, a lease creates only personal rights and not real
judicially.2 Thus, it is now settled that a judgment of eviction of the Supreme Court it was held that where the mortgage deed con- rights, unless any of the three exceptions mentioned above
against a tenant affects a sublessee even if the latter is not made a tains prohibition against encumbrance of the mortgaged property, exists. As a rule, therefore, it cannot be registered.
party to the ejectment case,3 so much so that a writ of execution leasehold rights over the same property subsequently acquired cannot
issued in a forcible entry and detainer case is enforceable not only be registered or annotated in the title thereof.9 But, where the property leased is registered not under the
against the defendant but also his privies even though the latter old Mortgage Law but under Act No. 496, in accordance with the
had not been made a party-defendant in the judgment case. 4 Unregistered lease not void. Tor-rens system, the rule is different. The latter Act provides
expressly that all interests and this word includes the interest
Registration of leases. Section 50 of Act 496, as amended by Section 51 of P.D. No. arising from a contract of lease even for a period of less than six
1529, does not say that an unregistered lease is void. On the years in land registered in the registry under said Act are not
Leases of registered land shall be registered in the manner otherhand, it says that the lease shall operate as a contract between only susceptible of registration therein but must necessarily be
provided in Section 52 of Act No. 496, as amended by Section 54 of the parties and as evidence of authority to the Register of Deeds to registered in order to affect third persons. 13 Under the Torrens
51
system, it is the act of registration that is the operative act to bind Commonwealth Act No. 141, such land may only be leased, but Now, however, the question has been resolved by the
the land and thereby creates real rights enforceable against the not sold, to aliens, and the lease granted shall only be valid Supreme Court, ruling that where a contract of lease of land in
whole world. while the land is used for the purpose referred to. The exclusion favor of an alien stipulates a period of twenty-five years,
of sale in the new Act is undoubtedly in pursuance of the renewable for another twenty-five years, it is still within ninety-
But now, under Article 1648 of the Civil Code of the constitutional limitation, and this again is another legislative nine years, and therefore is valid, invoking Article 1643 of the
Philippines, a general rule seems to have been set, that is, unless construction that the term pub-lic agricultural land includes land Civil Code of the Philippines.21
a lease is re-corded, it shall not be binding upon third persons. for residence purposes.17
The law makes no distinction as to whether the real estate being On the other hand, where a scheme to circumvent the
leased has been originally registered under the Spanish Mortgage Then, in a subsequent case,18 the Supreme Court once more Consti-tutional prohibition against the transfer of lands to aliens
Law or under the Torrens system. affirmed the above commitments regarding lease of public lands to is readily revealed in the purpose of the contract, then the illicit
aliens impliedly, with the following questions and answers: Si la purpose be-comes the illegal cause rendering the contract void.
Constitucion no prohibe el arrendamiento de terrenos publicos a ciu- Thus, if an alien is given not only lease of, but also an option to
Knowledge of existing lease binding on purchaser. dadanos ertranjerosi por que el Congreso va a prohibirles, por medio buy, a piece of land, by virtue of which the Filipino owner cannot
del Codigo Ciuil nueuo, el arrendamiento de los bienes de la propie- sell or otherwise dispose of his property, this to last for fifty years
Where the purchaser has knowledge at the time of the dad priuada? Zpara que los proprietarios no reciban la renta de sus as in this case, then it be-comes clear that the arrangement is a
purchase that the land has been leased to a third person and is fincas? El arrendamiento de terrenos publicos fomento su desarrollo y virtual transfer of ownership, whereby the owner divests himself
informed of the terms of such lease, he is bound to respect it, los mejora. Si se limitase su arrendamiento solamente a los not only of the right to enjoy the land (jus possidendi, jus utendi,
although it is not entered upon the certificate of title, the lease is naturales, Za mejora seria lenta. jus fruendi and jus abutendi), but also the right to dispose of it
such a case to be deemed a part of the contract of sale. 14 That is (jus disponendi) rights the sum total of which makes up
the rule under Article 1676 of the new Civil Code, consistent with The citizenship of an applicant is not decisive as to his right to ownership.22
the principle that actual knowledge is equivalent to registration. lease public land, such as a foreshore land, because under Section 60
However, said rule applies only to leases for fixed terms and not to of the Public Land Law, any person, corporation, association, or To counteract and discourage leases of long duration which
those from month to month.15 partnership disqualified from purchasing public land for agricultural may amount to a virtual transfer of ownership to aliens, the
purposes, may lease public land for industrial or residential purposes, maximum period for leases of private lands to such aliens or
Lease of lands to aliens. provided that such lease shall only be valid while said land is used for alien-owned cor-porations, associations, or entities not qualified
the purposes indicated.19 to acquire private lands in the Philippines, has now been fixed to
If aliens cannot buy lands in the Philippines, then how may 25 years, renewable for another period of 25 years upon mutual
those permitted to stay here be accommodated? On this point, the Period of lease allowable to aliens. agreement of both lessor and lessee.23
Supreme Court elaborated, as follows:
As may be observed in the above opinion of the Supreme Court Right of builder in good faith to register.
We are construing the Constitution as it is, and not as in the Krivenko case, aliens may be granted temporary rights in the
we may desire it to be. Perhaps the effect of our construction Philippines, such as the leasing of lands for residential purposes, this A possessor in good faith who builds or makes useful
is to preclude aliens, admitted freely into the Philippines, from being considered not forbidden by the Constitution. However, as to improve-ments on the estate possessed is entitled to demand
owning sites where they may build their homes. But, if this is how long a period may be granted an alien for the purpose, there payment of the value thereof and to retain the estate until the
the solemn mandate of the Constitution, we will not attempt have been serious doubts. expenditures incurred therein are paid to him, in accordance with
to compromise it, even in the name of amity or equity. We are Article 453 (now Article 546) of the Civil Code. That right to
satisfied, however, that aliens are not completely excluded by In Consulta No. 136 of the Register of Deeds of Camarines Sur, retain which the possessor has over the estate is a real right, and
the Constitution from the use of lands for residential purposes. the Court of First Instance of Manila, Branch IV, held that until may be registered in accordance with Section 70 et seq. of the
Since their residence in the Philippines is temporary, they may otherwise fixed by a superior authority, twenty-five years is a reason- Land Registration Act.
be granted temporary rights such as a lease contract, which is able period or duration for the lease of a private agricultural land in
not forbidden by the Constitution. Should they desire to favor of an alien qualified to acquire and hold such right, which has Conformably to the same principle, it was held that where
remain here forever and share our fortunes and misfortunes, been recognized by the Supreme Court in its decision in the case of one party is the owner of the land, and the other is the owner, in
Filipino citizenship is not impossible to acquire.16 good faith, of the building thereon, the owner of the land is
Krivenko vs. Register of Deeds of Manila In line with the same rul- entitled to ac-quire the building by paying its owner the value
In the same case, the Supreme Court made commitments ing, the Secretary of Justice rendered an opinion to the effect that the thereof, the owner of the building having the right to retain the
inci-dentally endorsing favorably the idea of leasing even public period of twenty-five years may be adopted as the maximum period same until the value is paid; or compel the owner of the building
lands to aliens. Thus the Court said: beyond which a contract of lease in favor of an alien cannot extend to pay him the price of the land as may be agreed upon; and, if
without violating the constitutional prohibition against acquisition of the parties cannot agree on the price, the same may be fixed by
. . . prior to the Constitution, under section 57 of Public lands by such aliens.20 This opinion is founded on the theory that a the competent court.25
Land Act No. 2874, land of the public domain suitable for resi- lease for a longer period may be tantamount to vesting ownership in
dence or industrial purposes could be sold or leased to aliens, an alien lessee. However, the builder cannot be obliged to pay for the land if
but after the Constitution and under Section 60 of its value is considerably more than that of the building. According
52
to Article 448 of the New Civil Code, in such case he shall pay value of the land and the excess, if any, to be delivered to the owner
reason-able rent, if the owner of the land does not choose to of the improvement in payment thereof.32
appropriate the building after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the A different rule may hold in the case of a lessee who introduced
court shall fix the terms thereof. Under the circumstance it would improvements in the leased premises. He does so at his own risk in
be inequitable to compel the builder to pay for the price of the land, the sense that he cannot recover their value from the lessor, much
which is consider-ably much more than that of the building. less retain the premises until he is reimbursed. The principle of pos-
sessor in good faith cannot apply to a lessee because as such lessee
In a certain instance it was held that a builder in good faith he knows that he is not the owner of the leased premises. Neither can
may not be required to pay rentals. He has a right to retain the he deny the ownership or title of his lessor.33
land on which he has built in good faith until he is reimbursed the
expenses incurred by him.26 Commitment to pay for improvements when enforceable by
execution.
On the other hand, where the improvements have been intro-
duced on a parcel of land by its purchaser under a deed of sale with In a case where the owner of the land, in conformity with a
pacto de retro, and there is no stipulation as to the repurchasers court decision, has made his choice to appropriate the building and
paying for the improvements, the value of the same is irrecoverable has duly informed the court of said choice, and accordingly is ordered
because the purchaser knew that he was introducing said improve- to comply with the same by buying the building erected on his land
ments at the risk of losing them should the land be redeemed. 27 and pay the value thereof as fixed by the court, such commitment of
How-ever, with respect to necessary and useful expenses incurred the owner of the land is thereby converted into a money obligation
on the thing sold, the vendor cannot avail himself of the right to which can be enforced by execution, regardless of the unwillingness
repurchase without reimbursing the vendee for such expenses and and inability of the party concerned to pay the amount. 34
returning the same price.28 Being a possessor in good faith when he
incurred such expenses, the vendee may retain the thing sold until oOo
reimbursement is made, or in case of useful expenses, until the
payment of the in-crease in value of the thing sold, at the option of
the vendor.29

Under Article 527 of the Civil Code, good faith is always pre-
sumed, and upon him who alleges bad faith on the part of the pos-
sessor rests the burden of proof. This legal presumption of good
faith is not quickly transferred into the opposite presumption of bad
faith solely on the basis of the legal fiction of constructive notice of
the registration proceeding. So long as the possessor is not actually
aware of any defect invalidating his title or mode of acquisition or
any fact or circumstance which would put a prudent man upon his
guard or require him to discover the flaw in his transferors title,
just so long will he be deemed a possessor in good faith with
concomitant right over his improvements.30

In any event the owner of the land where a house was con-
structed by a builder in good faith is given the choice either to
pay for the value of the house or to require the builder to pay for
the value of the land.31 In case of disagreement, the parties may
resort to the following remedies: (1) The parties may decide to
leave things as they are and assume the relation of lessor and
lessee; and should they disagree as to the amount of the rental,
then they can go to the court to fix that amount; (2) Should the
parties not agree to assume the relation of lessor and lessee, the
owner of the land is entitled to have the improvement removed;
and (3) The land and the improve-ment may be sold at public
auction, applying the proceeds thereof first to the payment of the
53
Chapter XIV equity to hold the legal title for the benefit of another. On the
TRUSTS AND POWERS OF ATTORNEY It involves the existence of equitable duties imposed upon the other hand, constructive trusts are created by the construction of
holder of the title to the property, to deal with it for the equity in order to satisfy the demands of justice and prevent
Trust, defined. benefit of another; and unjust enrichment. They arise contrary to intention against one
who, by fraud, duress, or abuse of confidence, obtains or holds
It has been said that a trust, in its simplest elements, is a It arises as a result of a manifestation of intention to cre-ate the legal right to property which he ought not, in equity and good
con-fidence reposed in one person, who is termed trustee, for the the relationship. (Morales, et al. vs. CA, et al., G.R. No. conscience, to hold. (Huang vs. CA, G.R. No. 108525, September
benefit of another, who is called the cestui que trust, the source of 117228, June 19, 1997, 83 SCAD 750). 13, 1994, 55 SCAD 289; Vda. de Esconde vs. CA, G.R. No.
the trust being called the trustor.1 It has also been defined as an 103635, February 11, 1996, 67 SCAD 642; Morales, et al. vs.
obligation of a person to whom the legal title to property has been Power of attorney, defined. CA, et al., supra).
transferred aris-ing out of a confidence reposed in him to apply the
property faithfully and according to such confidence. 2 This should A power of attorney has been defined as an authority enabling An implied trust is one that, without being express, is
not be confused with the term trust as used in some popular one person to dispose of the interest which is vested in another.6 It is deductible from the nature of the transaction as a matter of
sense in the United States, which refers to monopolitic also referred to as an authority to do some act in relation to lands, or intent or which is superinduced on the transaction by operation
combinations. the creation of estates therein, or of charges thereon, which the of law as a matter of equity, independently of the particular
owner, granting or reserving such power, might himself lawfully intention of the parties. It may either by resulting or constructive
It is the legal relationship between one person having an eq- perform.7 A general power of disposition as may be granted to trust. (Sps. Bejos vs. Cabreros, et al., G.R. No. 145849, July 22,
uitable ownership over a certain property and another having legal another in a power of attorney does not imply ownership. In fact, the 2005).
title thereto, the equitable ownership of the former entitling him to existence of such grant of power stands to prove the exclusion of the
the performance of certain duties and the exercise of certain idea of an absolute fee simple in the person who possesses the power. Implied trusts.
powers of the latter. This legal relationship can be distinguished
from other relationships of a fiduciary character, such as deposit, Power of attorney distinguished from trust. Among the cases of implied trusts recognized in this
guardianship and agency, in that the trustee has legal title to the jurisdiction, the following are expressly defined in our New Civil
property. (Heirs of Maximo Labanon, etc. v. Heirs of Constantino In a power of attorney only two persons are necessary, namely, Code:
Labanon, etc., G.R. No. 160711, August 14, 2007). the principal and the attorney-in-fact; whereas, in a trust there are
generally three persons involved, namely, the trustor, the trustee, and ART. 1448. There is an implied trust when property is
In the Philippines, our Civil Code (Article 1441) recognizes two the cestui que trust or beneficiary. A power of attorney is never sold and the legal estate is granted to one party but the
kinds of trusts, namely, express trust and implied trust. An express imperative but always discretionary, while a trust is always impera- price is paid by another for the purpose of having the
trust is created by the intention of the trustor or of the parties and, tive and leaves nothing to the option of the trustee. The attorney-in- beneficial interest of the property. The former is the trustee,
when concerning real property or any interest therein, is required fact in a power of attorney acts for the use and benefit of the principal while the latter is the beneficiary. However, if the person to
to be evidenced by writing, parol evidence not being sufficient who appointed him, while the trustee in a trust instrument acts not whom the title is conveyed is a child, legitimate or ille-
(Arti-cle 1443). Thus, it was held that express trust cannot be necessarily for the benefit of the trustor who appointed him but, upon gitimate, of the one paying the price of the sale, no trust is
proved by parol evidence.3 On the other hand, an implied trust his discretion, for the ultimate benefit of a third party the cestui implied by law, it being disputably presumed that there is a
exists only by operation of law (Article 1441), and may be proved que trust. gift in favor of the child.
by parol evidence. (Article 1457). No particular form of words or
conduct is necessary for the manifestation of intention to create a Kinds of trust and how are they created. ART. 1449. There is also an implied trust when a
trust. It is possible to create a trust without using word trust or donation is made to a person but it appears that although
trustee.4 Thus, where the grantor conveys land to the grantee Trusts are either express or implied. Express trusts are created the legal estate is transmitted to the donee, he nevertheless
with the understanding that after the latters death the property by the intention of the trustor or of the parties, while implied trusts is either to have no beneficial interest or only a part thereof.
would be returned to the grantor or his heirs, an implied trust is come into being by operation of law, either through implication of an
created in favor of the grantor or his heirs.5 intention to create a trust as a matter of law or through the im- ART. 1450. If the price of a sale of property is loaned
position of the trust irrespective of, and even contrary to, any such or paid by one person for the benefit of another and the
Characteristics of trust. intention. conveyance is made to the lender or payor to secure the
payment of the debt, a trust arises by operation of law in
The characteristics of a trust are the following: In turn, implied trusts are either resulting or constructive trusts. favor of the person to whom the money is loaned or for
(Heirs of Maximo Labanon v. Heirs of Constantino Labanon, G.R. No. whom it is paid. The latter may redeem the property and
It is a relationship; 160711, August 14, 2007). Resulting trusts are based on the compel a conveyance thereof to him.
equitable doctrine that valuable consideration, and not legal title
It is a relationship fiduciary in character; determines the equitable title or interest and are presumed always to ART. 1451. When land passes by succession to any
have been contemplated by the parties. They arise from the nature or person and he causes the legal title to be put in the name
It is a relationship with respect to property, not one involv- circumstances of the consideration involved in a transaction whereby of another, a trust is established by implication of law for
ing merely personal duties; a person thereby becomes invested with legal title but is obligated in the benefit of the true owner.
54
shield for the commission of frauds. Fraud vitiates everything tainted interest and is presumed always to have been contemplated by
ART. 1452. If two or more persons agree to purchase by it, and the mere fact that the vendee has succeeded in registering the parties.
property and by common consent the legal title is taken in the his deed of sale in the registry of property and the corresponding
name of one of them for the benefit of all, a trust is created transfer certificate of title issued cannot vest in him any right over the It arises from the nature or circumstances of the
by force of law in favor of the others in proportion to the land. Such land being impressed with a trust, the holder thereof may consideration involved in a transaction whereby one person
interest of each. be compelled to reconvey it to the lawful owner in accordance with thereby becomes in-vested with legal title but is obliged in equity
the provision of Article 1456 of the Civil Code. 10 A purchaser who to hold his legal title for the benefit of another. (OLaco vs.
ART. 1453. When property is conveyed to a person in obtained a certificate of title in his name with his admitted knowledge Valentin Co Cho Chit, et al., supra, citing 76 Am. Jur. 2d. 429).
reliance upon his declared intention to hold it for, or transfer it of the facts about the ownership of the property is considered as a
to another or the grantor, there is an implied trust in favor of trustee, not in its technical sense, but for a want of a better term. 11 Requisites of a purchase of money resulting trust.
the person whose benefit is contemplated.
So, also in case of mistake in the insertion of the lot description To give rise to a purchase money resulting trust, it is
ART. 1454. If an absolute conveyance of property is of the property intended to be sold, the registration of the deed of essential that there be:
made in order to secure the performance of an obligation of sale does not give any rights to the vendee over the wrong lot
the grantor toward the grantee, a trust by virtue of law is described therein but instead impresses his acquisition with a trust an actual payment of money, property or services, or an
established. If the fulfillment of the obligation is offered by the and he can be compelled to reconvey the property to the lawful owner equivalent, consisting of valuable consideration; and
grantor when it becomes due, he may demand the in accord-ance with the provisions of Article 1456 of the Civil Code. 12
reconveyance of the property to him. such consideration must be furnished by the alleged ben-
Kinds of implied trusts. eficiary of a resulting trust. (76 Am. Jur. 2d. Trusts
ART. 1455. When any trustee, guardian or other person 180; Morales vs. CA, et al., G.R. No. 117228, June 19,
holding a fiduciary relationship uses trust funds for the Implied trusts may either be: (1) resulting, or (2) constructive 1997, 83 SCAD 750).
purchase of property and causes the conveyance to be made trusts, both coming into being by operation of law. (OLaco, et al. vs.
to him or to a third person, a trust is established by operation Valentin Co Cho Chit, et al., G.R. No. 58010, March 31, 1993). Burden to prove the existence of trust and the nature of
of law in favor of the person to whom the funds belong. the evidence.
Concept of resulting trust.
ART. 1456. If the property is acquired through mistake As a rule, the burden of proving the existence of a trust is
or fraud, the person obtaining it is, by force of law, considered A resulting trust is presumed to have been contemplated by the on the party asserting its existence, and such proof must be clear
a trustee of an implied trust for the benefit of the person from parties, the intention as to which is to be found in the nature of their and satisfactorily to show the existence of the trust and its
whom the property comes. transaction but not expressed in the deed itself. It is based on the elements. While implied trusts may be proved by oral evidence,
equitable doctrine that valuable consideration, not legal title, the evidence must be trustworthy and received by the courts
It is to be borne in mind that the enforcement of an implied or determines the equitable title or interest. (Sps. Bejos vs. Cabreros, et with extreme cau-tion, and should not be made to rest on loose,
constructive trust is, in effect, to provide an equitable remedy al., G.R. No. 145849, July 22, 2005). equivocal or indefinite declarations. Trustworthy evidence is
against unjust enrichment of a person at the expense of another. required because oral evidence can easily be fabricated. (Salao
The cases of implied trust as defined in Arts. 1448 to 1456 above Concept of constructive trust. vs. Salao, 70 SCRA 65; OLaco vs. Co Cho Chit, 220 SCRA 656;
do not exclude such other instances as contemplated by Article Ong Ching Po vs. CA, 57 SCAD 619, 239 SCRA 341).
1442 of the same Code, which may be established by the principles A constructive trust is created, not by any word evincing a direct
of general law of trusts insofar as they are not in conflict with the intention to create trust, but by operation of law in order to satisfy How constructive trust created and its basis.
Civil Code, the Code of Commerce, the Rules of Court, and special the demand of justice and to prevent unjust enrichment. It arises
laws. contrary to an agreement or intention against one who, by fraud, A constructive trust is created by the construction of equity
duress or abuse of confidence, obtains or holds the legal right to in order to satisfy the demands of justice and prevent unjust
Fraudulent registration of land holds the person in whose property which he ought not, in equity and good conscience, to hold. enrichment. It arises contrary to intention against one who, by
name the land is registered as a mere trustee. 8 Thus, there the A constructive trust is illustrated in Article 1456 of the Civil Code fraud, duress, or abuse of confidence, obtains or holds the legal
land is de-creed in the name of a person through fraud or mistake, when it provides that if the property is acquired through mistake or right to property which he ought not, in equity and good
such person is by operation of law considered a trustee of an fraud, the person obtaining it is by force of law, considered a trustee conscience, to hold. (OLaco, et al. vs. Valentin Co Cho Chit,
implied trust for the benefit of the person from whom the property of an implied trust for the benefit of the person from whom the supra, citing 76 Am. Jur. 2d. 446).
comes. The benefici-ary shall have the right to enforce the trust, property comes. (Sps. Bejos vs. Cabreros, et al., G.R. No. 145849,
notwithstanding the irrevocability of the Torrens title and the July 22, 2005). Examples of resulting trusts.
trustee and his successors-in-interest are bound to execute the
deed of reconveyance.9 How resulting trust arise; its basis. The following are examples of resulting trusts.

Thus a holder in bad faith of a Torrens title is not entitled to Resulting trust is based on the equitable doctrine that valuable There is an implied trust when property is sold, and the
the protection of the law inasmuch as the law cannot be used as a consideration, and not legal title determines the equitable title or legal estate is granted to one party but the price is
55
paid by another for the purpose of having the beneficial If property is acquired through mistake or fraud, the per-son If the instrument creating or declaring a trust or other
interest of the property. The former is the trustee, while obtaining it is, by force of law, considered a trustee of an equitable interest contains an express power to sell, mortgage,
the latter is the beneficiary. However, if the person to implied trust for the benefit of the person from whom the or deal with the land in any manner, such power shall be stated
whom the title is conveyed is a child, legitimate or property comes. (Art. 1456). in the certificate of ti-tle by the words of description in case of
illegitimate, of the one paying the price of the sale, not other powers. No instrument transferring, mortgaging, or in any
trust is implied by law, it being disputably presumed that Existence of cestui que trust not indispensable. way dealing with registered land held in trust shall be registered,
there is a gift in favor of the child. (Art. 1448). unless the power thereto enabling is expressly conferred in the
In regard to private trust, it is not always necessary that the instrument of trust, or unless the decree of a court of competent
There is also an implied trust when a donation is made to a cestui que trust should be named, or even in esse at the time the jurisdiction has construed the instrument in favor of such power,
person but it appears that although the legal estate is trust is created in his favor.13 Thus, a devise to a father in trust for in which case a certified copy of such decree may be filed with
transmitted to the donee, he nevertheless is either to accu-mulation for his children lawfully begotten at the time of his the Register of Land Titles and Deeds and he shall make
have no beneficial interest or only a part thereof. (Art. death has been held to be good although the father had no children at registration in accordance therewith.18
1449). the time of the vesting of the funds in him as trustee. In charitable
trust the rule is still further relaxed.14 Appointment of new trustee.
If two or more persons agree to purchase property and by
common consent the legal title is taken in the name of Trust created to go around the law, void. When a new trustee of registered land is appointed by a
one of them for the benefit of all, a trust is created by court of competent jurisdiction, a new certificate shall be entered
force of law in favor of the others in proportion to the The prohibition of our Constitution against aliens acquiring lands to him upon presentation to the Register of Deeds of a certified
interest of each. (Art. 1452). in the Philippines, except through hereditary succession, has brought copy of the decree and the surrender and cancellation of the
forth the anomalous practice among disqualified persons of employing duplicate certificate.19
When property is conveyed to a person in reliance upon his dummies or qualified third persons to acquire for them by purchase
declared intention to hold it for, or transfer it to another lands which they otherwise could not acquire legally. While the Registration of constructive
or the grantor, there is an implied trust in favor of the scheme may simulate a trust, the creation thereof being prompted by
person whose benefit is contemplated. (Art. 1453). an intent to go around the law, it is void and of no legal force and Whoever claims an interest in registered land by reason of
effect. This, it has been held that a trust will not be created when, for any implied or constructive trust shall file for registration a sworn
Examples of constructive trusts. the purpose of evading the law prohibiting one from taking or holding statement thereof with the Register of Deeds. The statement
real property, he takes a conveyance thereof in the name of a third shall contain a description of the land, and a reference to the
The following are examples of constructive trusts. person.15 number of the certificate. Such claim shall not affect the title of a
purchaser for value and in good faith before its registration. 20
If the price of a sale of property is loaned or paid by one per- By transgressing the law and allowing one to be a dummy in the
son for the benefit of another and the conveyance is acquisition of land, he has eliminated the very source of his claim in Right of trustee to apply for registration.
made to the lender or payor to secure the payment of the land and, consequently, he cannot lawfully assert any right or
the debt, a trust arises by operation of law in favor of the interest therein.16 Section 14 of P.D. No. 1529 expressly grants any trustee
person to whom the money is loaned or for whom it is author-ity to file an application for registration of any land held in
paid. The latter may redeem the property and compel a Registration of trust. trust by him, provided he is not expressly prohibited to do so by
conveyance thereof to him. (Art. 1450). the instru-ment creating the trust.
Whenever a deed or other instrument is filed for the purpose of
If an absolute conveyance of property is made in order to transferring registered land in trust, or upon any equitable condi-tion Trustee cannot assert title adverse to his principal.
secure the performance of an obligation of the grantor or limitation expressed therein, or for the purpose of creating or
toward the grantee, a trust by virtue of law is declaring a trust or other equitable interest in such land without The rule has it that the relations of an agent to his
established. If the fulfillment of the obligation is offered transfer, the particulars of the trust, condition, limitation, or other principal are fiduciary, and it is an elementary and very old rule
by the grantor when it become due, he may demand the equitable interest shall not be entered by the words in trust, or that in regard to property forming the subject matter of the
reconveyance of the property to him. (Art. 1454). upon condition, or other apt words, and by a reference by number agency, he is estopped from acquiring or asserting a title adverse
to the instrument authorizing or creating the same. A similar memo- to that of the principal. His position is analogous to that of a
When any trustee, guardian or other person holding a randum shall be made upon the duplicate certificate. The Register of trustee and he cannot consist-ently with principles of good faith,
fiduciary relationship uses trust funds for the purchase of Deeds shall note upon the original instrument creating or declaring be allowed to create in himself an interest in opposition to that of
property and causes the conveyance to be made to him the trust or other equitable interest a reference by number to the his principal or cestui que trusts.21 Affirming the same doctrine,
or to a third person, a trust is established by operation of certificate of title to which it relates, and to the volume and page in the Supreme Court declared that the registration of the property
law in favor of the person to whom the funds belong. the registration book where it is registered.17 in the name of the trustee in possession thereof must be deemed
(Art. 1455). to have been effected for the benefit of the cestui que trust.22
Trust with express power to sell, etc. Where there is bad faith or fraud in obtaining a decree with
respect to a registered property, the same does not belong to the
56
person in whose favor it was issued, and the real owners would be In an implied trust, the action to recover must be brought within agency be a general or a special one are bound at their peril, if
entitled to recover the ownership of the property so long as the 10 years from the issuance of the title to the property. Thereafter, the they would hold the principal, to ascertain not only the fact of the
same has not been transferred to a third person who has acquired action shall prescribe. In Gicano vs. Gegato, et al., G.R.No. 63575, agency but the nature and extent of the authority, and in case
it in good faith and for a valuable consideration. This right to January 20, 1988, the SC said that if an action is filed after 23 years, either is controverted, the burden of proof is upon them to
recover is sanctioned by Section 55 of Act No. 496, as amended by time would have already eroded the right of action and ulti-mately establish it.31
Act No. 3322.23 The registrant is regarded in the eyes of the law as erased it, as a sand castle on a shore is slowly and inexorably
a mere trustee. Hence, he is under obligation to execute the deed obliterated by the rising tide. (See also Lebrilla vs. IAC, G.R. No. Notation of power of attorney on title.
of reconvey-ance in favor of the true owner in keeping with the 72623, December 18, 1989; Adille vs. CA, L-44546, January 29,
primary principle of law and equity that one should not unjustly 1988; Gonzales vs. IAC, G.R. No. 66479, November 21, 1991). The memorandum of a power of attorney made on the back
enrich himself at the expense of another. 24 of a certificate of title is not admissible as evidence of the
Prescription of action for reconveyance of property held contents of said power of attorney, but only of the fact of its
Possession by trustee, when deemed adverse. under constructive trust. execution, of its presenta-tion for notation, and of its notation for
the purposes of constructive notice to the public in connection
It is a well-settled rule that possession of a trustee is, in law, An action for reconveyance of real property based on an implied with the creation of preferential rights to the registered land
possession of the cestui qui trust and, therefore, it cannot be a or constructive trust prescribes in ten years, provided that no fraud covered by the title.32
good ground for title by prescription. The only instance in which the has been employed by the trustee prior to or simultaneous with the
pos-session of a trustee may be deemed adverse to the cestui que procurement of the property in his name, in which case the enforce- How power of attorney should be construed.
trust is when the former makes an open repudiation of the trust by ment of the implied trust does not prescribe. 27 While implied trust
unequivo-cal acts made known to the latter. It has been held that prescribes in ten years, the explicit acknowledgment of the trust in a Power of attorney, like any other instrument, is to be
the trustee may claim title by prescription founded on adverse public instrument by the trustee makes it an express trust, which construed according to the natural import of its language; and
possession, where it appears that he has performed unequivocal continues and subsists until repudiated, in which case prescription the authority which the principal has conferred upon his agent is
acts of repudiation amounting to an ouster of the cestui que trust. runs from repudiation.28 not to be extended by implication beyond the natural and
A mere silent posses-sion of the trustee unaccompanied with acts ordinary significance of the terms in which that authority has
amounting to an ouster of the cestui que trust cannot be construed Thus, it cannot be overemphasized that now it is a settled been given. The attorney has only such authority as the principal
as an adverse possession. Mere perception of rents and profits by doctrine that an action for reconveyance based on implied or con- has chosen to confer upon him, and one dealing with him must
the trustee, and erecting fences and buildings adapted for the structive trust is prescriptible. It prescribes in ten years. And where ascertain at his own risk whether his acts will bind the principal.
cultivation of the land held in trust, are not equivalent to the transaction constituting implied or constructive trust has been
unequivocal acts of ouster of the cestui que trust. So also, the fact registered, the period of prescription commences as of the date of its A power of attorney which vests the agent with authority
of having declared the land in the name of the trustee for taxation registration.29 for me and in my name to sign, seal, and execute, and as my
purposes constitutes no such unequivocal act of repudiation act and deed, deliver any lease, or any other deed for conveying
amounting to an ouster and: cannot thus constitute adverse Effect if a property is acquired through mistake or fraud. any real or personal property does not carry with it or imply that
possession as basis for title by prescription. 25 A concrete instance to the agent for and on behalf of his principal has the power to
prove adverse possession by a trustee amounting to an ouster of If property is acquired through mistake or fraud, the person execute a promissory note or a mortgage to secure its
the owner is where the trustee has refused to share the products of obtaining it, is by force of law, considered a trustee of an implied trust payment.33 For the purpose of execut-ing a mortgage, an express
the land with said owner or his heirs.26 for the benefit of the person from whom the property comes. (Art. power is required; and if an attorney in fact is authorized to
1456, NCC). Thus, the law thereby creates the obligation of the mortgage he cannot sell, and vice versa. In fact, under Article
A trustee may not acquire title over a property held in trustee to reconvey the property and the title thereto in favor of the 1878, par. 8 of the new Civil Code, even to lease real property to
trust. true owner. The prescriptive period for the reconveyance for fraudu- another person for more than one year now requires spe-cial
lently registered real property is ten (10) years reckoned from the power, just as for any act of strict dominion. However, the said
As a rule, no because the possession is not adverse. In order date of the issuance of the certificate of title. (Consuelo Vda. de Article of the Civil Code does not apply to a judicial administrator
that he may acquire title by acquisitive prescription, the following Alberto, et al. vs. Francis Go, et al., G.R. No. 139843, July 21, 2005). who may validly lease, even if the same exceeds one year,
requisites must be present: property of the estate without prior judicial authority and
Registration of power of attorney. approval, since in that case lease is considered an act of
He must repudiate the trust; administration.34
Any person may by power of attorney procure land to be
He must communicate such repudiation to the beneficia-ries; registered and convey or otherwise deal with registered land, but the oOo
letters of attorney shall be acknowledged before a notary public and
The evidence thereon must be clear and conclusive; shall be filed with the Register of Deeds of the city or province where
the land lies, and registered. Any instrument revoking such letters
There must be adverse, open, public, and continuous pos- shall be acknowledged, and registered in like manner.30 Like a trustee,
session within the period fixed by law. an attorney in fact cannot assert title adverse to his principal.
Persons dealing with an assumed agent, whether the assumed
57
Chapter XV description sufficiently accurate for identification of the land intended principal features of Torrens system of registration, requiring that
INVOLUNTARY DEALINGS WITH REGISTERED LAND to be affected. all encumbrances on the land or special estates therein be shown
ATTACHMENT AND OTHER LIENS or at least intimated upon the certificate of title.
On the other hand, Rule 57, Section 7, of the Rules of Court, re-
Involuntary dealings. quires that a copy of the order of attachment, together with a It may be stated here, however, that according to a more
descrip-tion of the property attached, and a notice that it is attached, recent decision,8 cited with approval by the Supreme Court in the
As the phrase indicates, involuntary dealings with registered be filed with the Registrar, the notice to contain a reference to the case of Levin vs. Bass,9 in involuntary registration, such as an
lands refer to certain kind of transactions affecting such lands in number of the certificate of title and the volume and page in the attachment, levy upon execution, lis pendens and the like, entry
which the cooperation of the registered owner is not needed. It registration book where the certificate is registered. The Registrar is thereof in the day book is a sufficient notice to all persons of
may even be against his will. also directed to index the attachment in the names of both the such adverse claim.
plaintiff and the defendant as well as in the name of the persons, if
Involuntary dealing and involuntary transactions are syn- any, by whom the property is held or in whose name it stands on the What purchaser of attached property gets.
onymous. Under the Uniform Land Registration Act, the term is records.
defined as the transmission of registered land or any interest When an attachment has been duly levied upon property, a
therein by descent, the right of curtesy and dower, all equitable purchaser thereof subsequent to the attachment takes the
rights and claims, judicial proceedings or statutory liens or charges, Owners duplicate title not immediately required for property subject to the attachment. 10 But, in determining priority
the exercise of the right of eminent domain, the lien of delinquent annotation of attachment, etc. between two attachments on execution affecting the same
taxes and levies, affecting registered land or any interest therein. 1 property, it is not the priority of the execution sales held
In every case where an attachment or other lien or adverse pursuant thereto that will determine the preference, but the
Attachment, nature and kinds. claim of any description is registered, and the duplicate certificate is priority between the two attach-ments, that is, the attachment
not presented at the time of the registration to the Register of Deeds, previously registered is superior and preferred to a subsequent
In general, an attachment is a writ issued at the institution or he shall within thirty-six hours thereafter send notice by mail to the one.11
during the progress of an action, commanding the sheriff or other registered owner, stating that such papers have been registered, and
public officer to attach the property, rights, credits, or effects of the requesting him to send or produce the duplicate certificate in order In line with the same principle, it was held that where a
defendant to satisfy the demands of the plaintiff.2 that memorandum of the attachment or other lien or adverse claim pre-liminary attachment in favor of A was recorded on
may be made thereon. If the owner neglects or refuses to comply November 11, 1932, and the private sale of the attached
Attachment may be classified into three kinds, namely: (1) within a reasonable time, the Register of Deeds shall report the mat- property in favor of B was executed on May 29, 1933, the
preliminary attachment; (2) garnishment; and (3) levy on ter to the court, and the court, after notice, shall enter an order to attachment lien has priority over the private sale, which means
execution. Preliminary attachment is that issued at the institution the owner to surrender his certificate at a time and place to be named that the purchaser took the property subject to such attachment
or during the progress of an action. It is a mesne process, liable to therein, and may enforce the order by suitable process. It is for the lien and to all of its consequences, one of which is the
be dissolved at any time and the judgment upon which may or may court and not for the Administrator of Land Registration Authority to subsequent sale on execution. 12 The auction sale being a
not affect the property seized. Garnishment is an attachment by compel the surrender.4 necessary sequel to the levy, it enjoys the same preference as
means of which plaintiff seeks to subject to his claim property of the attachment lien enjoys over the private sale. In other words,
the defendant in the hands of a third person called the garnishee, The procedure as outlined above may also be followed in the the auc-tion sale retroacts to the date of the levy. Where the rule
as well as money owed by such third person to defendant. registration of a mortgage deed affecting registered land, upon the be otherwise, the preference enjoyed by the levy of execution
Garnishment proceedings are usually directed to personal property. request of the mortgagee, if it is not possible for him to produce the would be meaningless and illusory.13 It thus follows that the
Levy on execution is the attachment issued after the final judgment owners duplicate certificate of title.5 purchaser in the execution sale, whom we may call C, has a
in satisfaction thereof.3 better right than B over the property in question. But, where
Entry of attachment in day book; sufficiency. prior to the attachment lien and the subsequent execution sale,
Under the Land Registration Act we shall not be concerned the property was validly mortgaged to a person who in this case
about garnishment. It was formerly held that although the notice of attachment has happened to be B also, it was held that the execution sale in
not been noted on the certificate of title, its notation in the book of favor of C is subject to the rights of B as mortgage creditor,
Registration of attachments and other liens. entry of the Register of Deeds produces all the effects which the law whose right to a foreclosure thereof is reserved.14
gives to its registration or inscription.6 That rule, however, has been
Under the provisions of Section 69 of P.D. 1529, an reversed in a subsequent case, 7 holding that while the effect of Thus the purchaser at an execution sale acquires only the
attachment or copy of any writ, order or process, in order to create registration retroacts as of the date of the entry in the day book of identi-cal interest of the judgment debtor in the property which is
or preserve any lien, right or attachment upon registered land, may the Register, of Deeds, registration is not considered accomplished the subject of the sale. It follows that if at the time said
be filed and registered in the office of the Register of Deeds for the until and unless a memorandum of such document has been made on judgment debtor had no more right to or interest in the property
province or city in which the land lies, such writing to contain, the corresponding certificate of title. To hold that the mere entry of a because he had already sold it to another prior to the attachment
among other things, a reference to the number of the certificate of document in the day book without noting it on the certificate of title, or levy, then the purchaser at the auction sale acquires nothing. 15
title of the land to be affected, and also if the attachment, right, or is sufficient, would render Section 52 of the Land Registration Act
lien is not claimed on all the land in any certificate of title, a (now Section 54 of P.D. No. 1529) nugatory and destroy one of the Exception to bad faith rule due to previous knowledge.
58
Property redeemed by wife when not attachable. been previously paid, in spite of the vigorous objection of the
Where the purchaser at a public auction sale had knowledge, attachment creditor who main-tained that the court sitting as a
prior to or at the time of the levy, of a previous lien or Where the wife redeemed the land belonging to the conjugal land court may order the cancellation of such attachment under
encumbrance object of a third party claim, he does not come under partnership which was sold on execution, with money obtained by her Section 112 of Act No. 496 (now Section 108 P.D. No. 1529),
the protection of the law. In such case, his knowledge is equivalent from her father, said land has become paraphernal and as such is only when there is no substantial controversy, or serious
to registration and taints his purchase with bad faith. 16 But if beyond the reach of further execution. 22 She has acquired it by right objection and there is unanimity among the parties
knowledge of any lien or encumbrance upon the property is of redemption as successor in interest of her husband. It has ceased concerned.28 However, the right of the mortgagor to redeem
acquired after the levy, the purchaser cannot be said to have acted to be the property of the judgment debtor. It can no longer therefore securities in favor of the Development Bank of the Philippines
in bad faith in making the purchase and, therefore, such lien or be the subject of execution under a judgment exclusively affecting the may be attached and said attachment registered. What the law
encumbrance cannot affect his title.17 personal liability of the latter.23 prohibits is attachment of securities on loans granted by said
Bank and not the attachment of the right to redeem said
Thus, where a third-party claim was filed about one month It may not be amiss to mention here, however, that a widow securities. (Register of Deeds of Cagayan de Oro City, LRC
after the levy was recorded, the validity of the levy is unaffected by who, pursuant to a stipulation for repurchase, redeems the property Consulta No. 309, Jan. 3, 1961.)
any subsequent knowledge: which the judgment creditor might of her deceased husband from a contract of sale executed during the
have de-rived from the third-party claim. The fact that the third- lifetime of the husband does not thereby acquire the property in her So also, the Register of Deeds can properly deny inscription
party claim was presented one day before the execution sale is own absolute right. In such case the title reverts to the heirs of the of a levy of execution, when the title to the land is not in the
immaterial. If the levy is valid, as it was, the execution sale made deceased husband, subject to a lien in favor of the widow for the name of the defendant and no evidence is submitted to show
in pursuance thereof is also valid, just as a mortgage lien validly amount paid out by her to redeem the property.24 On the other hand, that he has any present or possible future interest in the land.
constituted may validly be foreclosed regardless of any equities when land belonging to a married woman in her own right, whether of However, if evidence is submitted, as, for instance, a copy of the
that may have arisen after its constitution. a total or paraphernal character, is redeemed from a contract of sale petition filed in court in the intestate proceeding, from which it
under pacto de retro by the use of funds pertaining to the com- could be inferred that the owner is dead and that the judgment
It may be stated in passing that knowledge of counsel of the munity estate, such property continues to be the separate property of debtor is one of the heirs of the deceased, his right of
existence of a prior lien, encumbrance or burden affecting the wife, but the community estate becomes creditor to the extent of participation in the estate, though still indeterminable, may be
registered property, does not of itself taint the purchase of such the amount expended to effect redemption.25 attached and sold.
property by his client with bad faith, in the absence of evidence
indicating that the counsel had communicated his information to Inheritance and indeterminate interests may be attached. Family home exempt from attachment.
the client.18
An undivided interest of a co-heir may be attached, without the Under the provisions of the Family Code, the family home is
Property of person other than judgment debtor cannot be necessity of waiting for a judicial declaration of heirs. So also, any exempt from execution, forced sale or attachment except as
at-tached. interest which a person may or might have in certain land may be provided for by the law, specifically, Article 155 of the Family
attached, even if said interest be indeterminate because of the Code provides:
A sheriff is not authorized to attach the property of any person pendency of the liquidation of the intestate estate. 26
under an execution except that of the judgment debtor. If he does Article 155. The family home shall be exempt from
so, the writ of execution affords him no justification, for the action When attachment may be refused registration. execu-tion, forced sale or attachment except:
is not in obedience to the mandate of the writ. Acts of the officer
which are not justified by the writ are without authority of law. An While it is true that the duty of the Register of Deeds to regis-ter For nonpayment of taxes;
injunction is a proper remedy to prevent the sheriff from selling the notice of attachment is ministerial, in cases like the one under
property for the purpose of paying the debts of another.19 Thus, consideration, where the law provides that certain properties given in For debts incurred prior to the constitution of the family home;
where the plaintiff has no cause of action against the defendant in a security to the Agricultural and Industrial Bank are not subject to
case, the latter is entitled to prove the allegations in his answer attachment, this provision of law shall be obeyed, and the only solu- For debts secure by mortgages on the premises before or after
regarding damages incurred by him when his property was tion is for the Register of Deeds to refuse inscription in view of the such constitution; and
attached.20 provisions of Section 26 of Commonwealth Act No. 459, which was
approved June 9, 1939, and which abrogates the previous law and For debts due to laborers, mechanics, architects, builders,
A writ of attachment ordering the sheriff to attach not only the rulings insofar as the securities on loans granted by the Agricultural materialmen and others who have rendered service or
properties of the defendant but also properties in the name of third and Industrial Bank are concerned.27 furnished materials for the construction of the building.
persons who may have purchased said properties at one time or
another from the defendant or his wife and children, irrespective of Thus, it was repeatedly held by the Supreme Court that, accord- Attachment of wifes share in conjugal property.
whether or not the sales were made in good faith and for value, is ing to Section 26 of Commonwealth Act No. 459, properties
one issued in excess of jurisdiction and, therefore, null and void. mortgaged to the Agricultural and Industrial Bank, which was On the question of whether the share or interest of the wife
Consequently, all the acts of the sheriff pursuant to such void writ succeeded to by the Rehabilitation Finance Corporation and later by in
of attachment are likewise void and of no effect.21 the Development Bank of the Philippines, are not subject to
attachment unless all debts and obligations in favor thereof have
59
the conjugal partnership property may be attached, it was held that latter has the superior right, as the attachment does not confer a real not from the date of the sale but from the registration of the
such right of the wife is merely an interest inchoate, a mere right.34 The reason for this is that the attachment does not change same. Consequently, until after the expiration of this period, the
expect-ancy, which constitutes neither a legal right nor an equitable the character of the debt; that it did not convert into a right to the buyer is not yet the absolute owner of the property; he has no
estate and does not ripen into title until it appears that there are thing itself the claim of the creditor; that it did not give him any right to the pos-session of the same, and if rents were collected
assets in the community after liquidation and settlement. Such preference over pre-existing claims which were not so provisionally by him, those rents shall be a credit upon the redemption
being the sta-tus of such right or interest of the wife, the same recorded.35 money to be paid in accord-ance with Section 30, Rule 39 of the
cannot be attached and sold at execution. The real test as to Rules of Court.39
whether or not property can be attached and sold upon execution is Accordingly, the Supreme Court further ruled that an unreg-
whether the judgment debtor hold such a beneficial interest in the istered deed is admissible in evidence to show a transfer of title as Auction sale retroacts to date of attachment lien.
property that he can sell or otherwise dispose of for value. 30 against an attaching creditor, holding that the attaching creditor was
not third persons mentioned in Article 389 of the Mortgage Law, and For purposes of determining preference of rights between
When attachment comes after a mortgage. that the levy of an execution against a judgment debtor upon real two or more lienholders of the same property, an auction sale
estate which stands in his name does not take precedence over an made by virtue of a preliminary attachment duly recorded
An attachment properly levied upon a property registered unrecorded deed to the same property made by the judgment debtor retroacts to the date of the attachment lien. The preference
under the Land Registration Act; once annotated, recorded, or prior to the levy in question.36 enjoyed by the lien of attach-ment would be meaningless and
registered in the office of the Register of Deeds, affects the realty illusory if preference should not, in like manner, be given to the
to which it refers, and from the moment it is inscribed, recorded, or Thus, it was held that a contract of sale is good as between the auction sale. It was for this reason that the Supreme Court
noted, it constitutes a lien on the property.31 It follows that, in parties to it without registration and is effective as against third invariably held that the auction sale retroacts to the date of
accordance with Section 225 of the Code of the Civil Procedure, the persons not holding a registered title, including creditors, with at- attachment.40
attaching creditor should have been included as party defendant, tachments and judgments.37
he having or claiming an interest in the premises subordinate in The above doctrine was reiterated in a subsequent case, 41
right to that of the holder of the mortgage. 32 But it is to be observed that in none of the above cases had the ruling that a levy on execution duly registered takes precedence
property been registered under the provisions of Act No. 496, known over a prior unregistered sale, and that even if the prior sale is
Attachment, how continued, reduced, or discharged. as The Land Registration Act, nor were the levies of attachment subsequently reg-istered before the sale in execution but after
made under the provisions of that Act touching on attachments and the levy was duly made, the preferred right under the execution
Attachment and liens of every description upon registered other liens. And while an unrecorded deed of conveyance executed sale should be maintained, because it retroacts to the date of the
land shall be continued, reduced, discharged, and dissolved by any by the owner of the land not registered under the provisions of the levy.
method sufficient in law, and to give effect thereof the certificate or Land Registration Act conveys the title and ownership to the
other instrument for that purpose shall be registered with the purchaser as of the date of its execution, so that a subsequent levy or In case of conflict between the rights under two
Register of Deeds.33 an attach-ment or execution by a judgment creditor of the vendor is attachments pursuant to which execution sales were
void and of no effect, the same rule cannot be applied where the land subsequently held, the property involved being registered under
Thus, it is also provided in Section 76 of Act No. 496 that has been registered under that Act, because, by its terms, an the Torrens system, the priority is generally determined by the
whenever an attachment on mesne process is continued, reduced, unrecorded deed of conveyance does not convey or affect the land priority of registration not of the execution sales but of the
dissolved, or otherwise affected by an order, decision or judgment until and unless the transaction is duly registered. attachment. The auction sales being merely the completion of
of the court in which the action or proceeding in which said the attachment liens, should relate back to the latter and enjoy
attachment was made is pending, or by the order of any judge or Registration of execution sale. the same priority.42
court having jurisdiction thereof, a certificate of the entry of such
order, decision, or judgment from the clerk of the court or judge by In order to enforce a lien of any description on registered land,
which such order, decision, or judgment has been rendered, and Section 74 of P.D. No. 1529 provides that whenever registered land is Purchasers risks at auction sale.
under the seal of the court or judge, shall be entitled to be sold on execution, or taken or sold for taxes or for any assessment, or
registered on presentation to the Register of Deeds. to enforce a lien of any character, or for any costs and charges While it is true that the rights acquired by the purchaser in
incident to such liens, any execution, or copy of execution, any of- an auction sale pursuant to an attachment retroact to the date of
Attachment for recovery of debt confers no real right under ficers return, or any deed, demand, certificate, or affidavit or other the attachment lien, where prior thereto there have been
Spanish Mortgage Law. instrument made in the course of proceedings to enforce such liens registered other liens or encumbrances, said purchaser is bound
shall be filed with the Register of Deeds for the province where the to abide by the final outcome in the enforcement of such liens or
An attachment obtained under the Spanish Mortgage Law by land lies and registered in the registration book and a memorandum encumbrances. Thus, it was held that the purchaser at an
virtue of a judgment for the recovery of a debt not secured by a made upon the proper certificate of title, in each case, as an adverse execution sale should bear in mind that the rule of caveat
mortgage does not confer real right. It is the general opinion that claim or encumbrance. emptor applies to such sales, that the Sheriff does not warrant
when a person, by virtue of a judgment for the recovery of a debt the title to the real property sold by him as the auctioneer, and
not supported by a mortgage, secured an attachment against An auction sale of property made pursuant to a levy of execu- that it is neither incumbent upon him to place the purchaser in
property which turns out to have been previously sold, although the tion should be recorded in the office of the Register of Deeds. The possession of the subject property.43
purchaser did not have the property registered in his name, the twelve-month redemption period provided by law commences to run
60
In effect, at a sheriffs sale the land actually sold is not neces- the delinquent property remains assessed in the name of a former taxpayer who was not personally notified of the sale of her
sarily that as described and advertised in the notice of sale, owner. There can be no reason, it is pointed out, why a Torrens title property, but maintains that the law is positive and leaves no
although that is a common acceptation, but only so much of the which binds the whole world cannot at least charge the government choice; that it is admittedly harsh and drastic but at the same
rights or interests which the judgment debtor may or might have in which has issued it with notice thereof. Although the taxpayer may be time it is a necessary means of insuring the prompt collection of
the land being offered for sale, and if the purchaser buys the criti-cized for his failure to have the land transferred in his name in taxes so essential to the life of the government. According to the
judgment debtors interests therein and it afterwards develops that the assessment record, that circumstance nevertheless cannot court, it is the categorical mandate of the law which she is
he has none, the purchaser is still liable on his bid because he has supplant the absence of notice. Of course, it is the duty of any person presumed to know and which makes it the duty of each person
offered so much for such interests in open market, so that it is for acquiring real property to prepare and submit a tax declaration within acquiring real estate in the city to make a new declaration
the purchaser to de-termine at his own risk before he bids what sixty days under Section 12 of Commonwealth Act No. 470, but it is thereof, with the advertence that failure to do so shall make the
such interests are worth. Hence, even if it should appear that at a no less true under Section 14 of the same Act that when the owner assessment in the name of the previous owner valid and binding
sheriffs sale one has bought the interests of the judgment debtor refuses or fails to make the required declaration, the provincial on all persons interested, and for all purposes, as though the
in a certain tract of land, and paid his money for the same, and assessor should himself declare the property in the name of the same had been assessed in the name of its actual owner.
meanwhile suit is brought to recover the land, and he is defeated in defaulting owner.47
the suit, he has no right to recover his money back, because he has However, to remedy the anomalous situation of delinquent
paid that much for the interests that the particular judgment debtor Variance in the description of the property stated in the notice of Ma-nila real estate being sold at public auction without personal
had in that tract of land.44 tax sale from that appearing in the certificate of title, with respect to notice served to the landowner, Republic Act No. 1571, approved
boundaries, location and area, is fatal, and the proceeding in such a June 16, 1956, has sought to correct the pre-existing practice by
Assignment in payment of judgment debt. case does not really give to the registered owner the notice providing that no such sale shall proceed unless the delinquent
demanded by the requirements of due process.48 taxpayer shall have been notified thereof by registered mail at
Where two attachments had been registered successively least sixty days before the date fixed for the sale.
affect-ing the same land, and meanwhile the attachment debtor Enforcement of irrigation charges likewise in personam.
executed a deed of assignment of the property in favor of the Title acquired in tax sale.
creditor under the first attachment in payment of the judgment While the proceeding provided by law in the enforcement of the
debt, will the assign-ment operate to dissolve the lien under the Government lien on lands by reason of irrigation fees is a little The tax title issued under the procedure adopted in the City
first attachment? It may be stated parenthetically that in this different from that followed in connection with the enforcement of of Manila for the recovery of delinquent taxes conveys only such
particular case the assignment was not registered. Held: That since realty tax lien, for the protection of the landowner delinquent in the title as was vested in the delinquent taxpayer. Such sale cannot
the purpose of the assignment is the transfer of the ownership of payment of said irrigation fee, the better rule is that said proceeding affect the rights of other lienholders, unless by the procedure
the property in payment of the judgment debt, although it may be be considered in personam in the sense that, although the delinquent adopted they have been given an opportunity to defend their
mentioned that the conveyance did not materialize because of landowner is summoned by publication, he should be sent personal rights. The purchaser at a tax sale, under the procedure adopted
failure of registration, it would be in-congruous to hold that the said notice of the delinquency and of the necessity to answer, mailed to his in the present case, gets no better title under his deed than that
assignment operated to dissolve the first attachment. Under the last known address. This is in accordance with the provisions of Rule which was held by the person assessed. In this case, the
law and equity, the prior attachment lien cannot be deemed lost by 14, Section 17 of the Rules of Court, taken from Section 399 of the respondent-appellant had a mortgage duly registered upon the
the execution of the deed of assignment as in this case. 45 Code of Civil Procedure, referring to publication of summons in a civil land sold. The sale was made after notice posted in different
action, mentioned in Section 13 of the Irrigation Act. 49 places in the City of Manila. No notice whatever was given to
Tax sale procedure one in personam. him, not even an attempt to notify him was made. Therefore,
Tax sale in Manila a deviation from rule; anomaly now cor- said respondent-appellant cannot be deprived of his mortgage,
The practice and procedure adopted in the Revised Adminis- rected. and the judgment of the trial court depriving him of his lien
tration Code in connection with the sale of land for the collection of without notice and an opportunity to be heard is null and void. 52
delinquent taxes and penalties due the government is considered as We have had a number of cases decided, involving lands in the
one in personam, and not in rem. Hence, it is necessary that all City of Manila, which deviated from the rule. It was held therein that Tax lien superior to attachment.
persons interested in the property involved be served personal no- in the sale of real estate in the City of Manila to satisfy delinquent
tice, to give them an opportunity to be heard before their rights can taxes, under the provisions of Sections 2497 and 2498 of the Revised Even assuming that an attachment is valid and effective,
be nullified. No rule is better established in the Philippines under Administrative Code, as amended by Act No. 4173, it is not necessary yet as a lien it is inferior or subordinate to a tax lien for Section
the due-process-law provision of the organic law than the one that the delinquent taxpayer or anyone holding or owning the delin- 2497 of the Revised Administrative Code, as amended, provides
which requires notice and an opportunity to be heard before any quent property be notified of the sale. It is sufficient for the validity of that taxes and penalties assessed against realty shall constitute
citizen can be deprived of his right.46 Notice by publication, which is the tax sale that it is advertised and that said advertisement is a lien thereon, which shall be superior to all other liens,
sufficient in proceedings in rem, does not as a rule satisfy the accomplished by posting a notice at the main entrance of the public mortgages or encumbrances of any kind whatsoever,53 Hence, a
requirements of proceedings in personam. building and in a public and conspicuous place in the district in which subordinate lien holder by virtue of a registered attachment or
the property lies, and by publication in a newspaper. 50 mortgage could and should redeem the property sold by virtue of
Thus, under Section 35 of Commonwealth Act No. 470, notice a tax lien within the period allowed and, in default thereof, his
of the public sale must be given to the delinquent taxpayer. This In the other case, where the same ruling was reiterated, the right as a junior encumbrancer lapses, rendering nugatory any
has reference to the registered owner liable to pay taxes, although Supreme Court expressed itself in sympathy with the delinquent attempt to enforce or foreclose the encumbrance.
61
that the sale of registered land to foreclose a tax lien need not be While Section 70 of Republic Act No. 409, otherwise known
Due process of law in tax sale. registered. On the contrary, Section 74 of said Decree specifically as the Revised Charter of the City of Manila, expressly provides
provides (insofar as it is pertinent here) that whenever registered that the period of redemption should start from the date of
The law does not create a presumption of the regularity of land is sold for taxes or for any assessment, any officers return, or sale, which may run counter to Section 50 of Act No. 496 (now
any administrative action which results in depriving a citizen or any deed, demand, certificate or affidavit or any other instrument Sec. 51 of P.D. 1529) which, if applied, would make the period of
taxpayer of his property, but, on the contrary, the due process of made in the course of proceedings to enforce such liens shall be filed redemption start from the registration of the tax sale, our
law to be followed in tax proceedings must be established by proof, with the Register of Deeds for the province where the land lies and Supreme Court favored a stand that the two apparently
and the general rule is that the purchaser of a tax title is bound to registered in the registration book, and a memorandum made upon conflicting laws must be harmonized and to that effect held that
take upon himself the burden of showing the regularity of all the proper certificate, in each case, as an adverse claim or the phrase the period of redemption shall be within one year
proceedings leading up to the sale.54 encumbrance. Section 51 also expressly provides that the act of from the date of sale should be interpreted to refer to the date
registration shall be the operative act to convey and affect the land. that the sale is actually registered. It took into consideration that
Tax sales to conform strictly to law. Hence, the tax sale made by the City Treasurer could not bind the inasmuch as practically all the real properties in the City of
land until it was registered.57 Manila are registered under the Torrens system, the transactions
The rule should be that a taxpayer should not be deprived of and conveyances and liens, whether voluntary or otherwise,
his property for tax delinquency except in strict conformity with the When period for redemption begins to run. involv-ing such properties must be recorded in the Office of the
law authorizing and regulating tax sales. Exact and complete Register of Deeds and annotated in the corresponding certificates
adherence to the law governing tax sales is indispensable, In cases of tax sales as well as those of other auction sales by of title, for the information not only of the registered owners but
therefore, not only for the protection of the taxpayer, but also to virtue of attachments, the statutes generally provide for a period of also of third per-sons, and this is in line with Section 50 of the
allay possible suspicion of collusion between the buyer and the one year (two years in certain cases of tax sales under Land Registration Act which expressly provides that the act of
public servants called upon to enforce such laws. Where there is no Commonwealth Act No. 470, otherwise known as the Assessment registration is the operative act that conveys the land or affects
evidence as to the contents of the notice of sale, or that said notice Law, as amended by Republic Act No. 1275) for purposes of title thereto.60 Of course, actual knowledge of an unregistered
was made in English, Spanish, and the local dialect commonly redemption. When sale involves registered land, the problem that sale on the part of the registered owner or of third persons is
used in the region and posted in a public and conspicuous place in may confront us is: When does that period commence to run? Is it equivalent to registration; it is equivalent to such notice as may
the barrio wherein the property is situated, and at the main from the actual date of the auction sale or from the date of result from registration. Really, the law does not require the
entrance of the provincial building, or as to how long it was posted registration of said sale? unnecessary and to those persons already having actual notice
and, further, where it appears that the sale was not held at the the necessity of registration does not exist. 61
exact place designated by statute, from which possible bidders Upon the assumption that in the case of tax sale the period
may not have seen or noticed the sale made in the office of the commences from the actual date set for the auction, it has been the Effect of failure to register tax sale on time.
municipal treasurer, the validity of the tax sale cannot be upheld. 55 common practice among purchasers, from whom the property may be
redeemed, to withhold the registration of the deed or certificate of It is required that the tax sale, whether in the form of an
Date of tax sale to be definitely specified. sale until after the lapse of the period, when the sale has become offic-ers return or a certificate of sale, be filed with the Register
final, thinking that if registration were to be done earlier the owner or of Deeds concerned and registered in the registry book, and a
In a case of tax delinquency sale where the notice thereof was holder of the title would be awakened in time, for incidentally he memorandum thereof be made upon the proper certificate of title
published that it would be held on December 15, 1940 at 9:00 would be advised by the Register of Deeds to surrender the title for to afford construc-tive notice to all the world. For this purpose it
a.m. and every day thereafter, at the same place and hour until all annotation of the sale, preparatory to its consolidation in the vendee is not necessary to wait for the expiration of the period
the properties shall have been sold to the highest bidder, our after the lapse of one year (or two years, as the case may be). On the prescribed by law for redemption. In that way the registered
Supreme Court ruled that such sale is invalid. Under the law other hand, if registration takes place after the lapse of the statu-tory owner may be apprised of the annotation of the encumbrance
(Commonwealth Act No. 470, Section 35), the provincial treasurer period, the owner would no longer have any more opportunity to and may take the necessary steps to protect his interest. He may
is enjoined to set forth in the notice, among other particulars, the exercise his legal right of redemption. choose either to abandon his property or redeem it within the
date of the tax sale. This mandatory requirement was not satisfied period provided by law. This requirement is fundamental because
in that case, because the announcement that the sale would take The above attitude of mind seems to be quite erroneous. Thus, it it is one of the safeguards that the law establishes in order that
place on December 15, 1940 and every day thereafter is as general was held that where registered land has been sold at public auc-tion owners of land who may have failed to take note of the sale of
and indefinite as a notice for the sale within this or next year or by virtue of an attachment and the persons entitled to redeem had no their property for delinquency in the payment of taxes may be
sometime within the month of December. In order to enable a notice thereof, they are allowed for purposes of redemp-tion one notified of the action taken in connection with such property. The
taxpayer to protect his rights, he should at least be apprised of the year from such date as the auction sale may have been registered. 58 failure of the purchaser at the tax sale to take this step vitiates
exact date of the proceeding by which he is to lose his property.56 Similarly, it was held that the tax sale in favor of the purchaser at fundamentally his petition for the consolidation of his title.
public auction becomes binding upon third persons only upon Issuance of new title to wait for expiration of period.
Necessity of registering tax sale. registration, so that the period for redemption only begins to run from
the date of such registration as regards third persons who had no Upon the expiration of the time, if any, allowed by law for
It is not necessary to register a tax lien because it is actual notice.59 redemption after registered land has been sold on any execution,
automati-cally registered, once the tax accrues, by virtue of Section or taken or sold for the enforcement of any lien of any
44 of P.D. No. 1529. But there is no provision of law to the effect description, the person claiming under the execution, or under
62
any deed or other instrument made in the course of the Under the law which permits a successor in interest to redeem new certificate authorized by Section 78 of the Land Registration
proceedings to levy such ex-ecution or enforce any lien, may the property sold on execution, the term successor in interest gen- Act is not a mechanical function of the lower court, which, in the
petition the court for the entry of a new certificate to him, and the erally includes one to whom the debtor has transferred his statutory nature of things, is empowered to pass upon and determine
application may be granted: Provided, however, That every new right of redemption, one to whom the debtor has conveyed his whether the petition is supported by good and valid reasons. This
certificate entered under this section shall contain a memorandum interest in the property for the purpose of redemption, or one who is also true in relation to the authority given the court under
of the nature of the proceeding on which it is based: And Provided, succeeds to the interest of the debtor by operation of law; it also Section 112 of the same Act.74
further, That at any time prior to the entry of a new certificate the includes one or more joint debtors who were joint owners of the
registered owner may pursue all his lawful remedies to impeach or property sold, or the wife as regards her husbands homestead by In this connection, it was held that under Sections 78, 111,
annul proceedings under execution or to enforce liens of any reason of the fact that some portion of her husbands title passes to and 113 of Act No. 496, known as the Land Registration Law,
description.63 her.69 where one acquires a valid deed or title to a property as a result
of an execution sale, tax sale, or any sale to enforce a lien, after
While redemption in the case of execution sale must be Redemption is proper when made by the debtors grantee or as- the expiration of the period, if any, allowed by law for
effected within the time prescribed, that is, within twelve months signee, or assignee for the benefit of creditors, or assignee or trustee redemption, when said new owner goes to the court and to the
after the sale, there are indeed cases where, having in view the in insolvency proceedings.70 If, in conventional redemption, the office of the Register of Deeds to have his deed recorded and
purpose sought to be achieved by statutory provisions of this kind vendor can alienate in favor of a third person his right to redeem the have a new certificate of title issued in his name, it is sufficient
and principally to promote justice and avoid injustice, courts may property sold, it is logical and not prohibited by law, that the for purposes of notifying the former owner to surrender his
by reasonable con-struction allow redemption notwithstanding the judgment debtor whose property has been attached on execution and certificate of title and show cause why it should not be cancelled;
actual expiration of the period fixed in the statute. 64 sold may convey or sell to third persons his right to exercise legal that the notification is effected by mail or by publication as the
redemption.71 court may order; and if despite such notification by mail or by
Besides, in case any objection is interposed relative to the publication, he fails to appear and surrender his certificate of
valid-ity of the proceedings under execution, or a question is raised Right to rentals. title, the court may validly order the cancellation of that
as to whether or not the property attached and sold is conjugal in certificate of title and the issu-ance of a new one in favor of the
nature, or that it has been constituted as a family home, which During the period of redemption a question that may arise is: new owner.75
under the law is exempt from execution, such matter should be Who is entitled to the rentals of the property bought at the execution
determined and threshed out by the court in a separate appropriate sale? Is it the purchaser or the judgment-debtor? The rule is that if A motion for the cancellation of certificate of title and the
action inasmuch as the relief provided under Section 78 of Act No. during the period of redemption the judgment-debtor is in possession issu-ance of a new certificate in its place must be filed and
496 (now Sec. 75 of P.D. No. 1529) is available only where there is of the property sold; he is entitled not only to retain it but also to re- entitled in the original case in which the decree of registration
a unanimity among the parties or that no serious objection is ceive its fruits, the purchaser not being entitled to its possession; but was entered, and the Court of First Instance has no jurisdiction
interposed by a party in interest.65 if the property is in the possession of a tenant, it is only then that the to entertain such motion in an ordinary civil case. 76
Who may redeem in execution sales. purchaser is entitled to receive its rents or the reasonable value for its
use and occupation. In such a case, the purchaser is accountable for Registration of title to land of tenant-farmers.
The property sold on execution may be redeemed either by the amount thus received to the judgment-debtor when he effects the
the judgment debtor, or his successor in interest in the whole or redemption. But where the judgment-debtor has failed to redeem With a view to emancipating tenant-farmers from the
any part of the property, or by the creditor having a subordinate within the prescribed one-year period and the property was leased to bondage of the soil and transferring to them the ownership of the
lien by attachment, judgment, or mortgage on the property sold or different tenants and was not possessed by the judgment-debtor, it land they and their predecessors have been tilling from time
on some part thereof.66 follows that the purchaser is entitled to the rentals that had ac-crued immemorial, Presi-dential Decree No. 27 was promulgated on
during the period of redemption and he is not at all accountable October 21, 1972, during the Martial Law. Under this decree, a
As to who may be considered successor in interest of the therefor to the judgment-debtor.72 tenant-farmer of a private agricultural land planted to rice and/or
judg-ment debtor for the purposes of such right of redemption, it corn is deemed the owner of a portion thereof constituting a
was held that the wife of such debtor who redeemed the property, Cancellation of certificate of title and issuance of new one. farm-sized farm of five hectares if not irrigated or three hectares
even with her own money, could do so as successor in interest of if irrigated. Eventually, the tenant-farmer will become the
the conjugal property sold on execution, because she has an The Court of First Instance (now Regional Trial Court), in the absolute owner of the farm after compliance with certain
inchoate right to such conjugal property.67 By analogy, the right of a exercise of its powers as a land registration tribunal, has special and conditions, among which being that he shall pay for the land by
son, with respect to the property of a father or mother, is also an limited jurisdiction. But this does not argue against the existence of annual equal amortizations for a period of fifteen years, in
inchoate or contingent inter-est, because upon the death of the the power of such a court to order the cancellation of certificates of default of which payment the cooperative association of farmers,
father or the mother or both, he will have a right to inherit said title and the issuance of new ones. Specific authority for this purpose of which he is required to be a full-pledged member, shall be
conjugal property. Now, if any holder of an inchoate interest is a is found in Sections 78 and 112 of the Land Registration Act. 73 bound to assume and pay. This obligation is guaranteed by the
successor in interest with right to redeem a property sold on government with shares of stock in government-owned and
execution, then the son is such a successor in inter-est, as he has The court, under the provisions of Sections 78 and 112 of the government-control-led corporations.
an inchoate right to the property of his father.68 Land Registration Act, has the authority to decide whether or not the
cancellation of the existing title and the issuance of a new certificate Under the provisions of a subsequent Presidential Decree
of title in the name of the petitioner should be granted. The entry of a (No. 266), providing for the mechanics of registration of
63
ownership of such land under the Torrens system, the land transfer
certificates issued to tenant-farmers are to be filed and registered,
free of any fees or charges, with the offices of the Registers of
Deeds of the city or prov-ince where the land lies, the same to be
entered in the Day Book and the corresponding memorandum
thereof annotated on the certificate of title of the landlord owner. If
the land involved has never been previously registered under the
Torrens system, the land transfer certificate is recorded in the
books made and provided for such un-registered land under Act
3344 (now Sec. 113, P.D. No. 1529).

Then as soon as a tenant-farmer shall have fully complied with


the requirements prescribed by Presidential Decree No. 27, includ-
ing the payment of the full amount of the price of the land, to him
is issued an Emancipation Patent which, upon being filed with the
Reg-ister of Deeds, shall be the basis of a transfer certificate of title
issued under the Torrens system in the name of the tenant-farmer,
setting forth therein the description and extent of the farmland
belonging to him in accordance with a duly approved survey plan.
An original certificate of title is also issued to such land even if the
same has not yet been originally registered under the Torrens
system.

oOo

64
Chapter XVI not parties to the case, a notice of lis pendens when annotated would thereof as a result of any conveyance of the land or any
REGISTRATION of LIS PENDENS, JUDGMENTS, amount to dimunition of their property rights without due process of encumbrance that may be made thereon posterior to the filing of
PARTITIONS, ETC. law.2 the notice of lis pendens.7

Lis pendens, meaning. In registering a notice of lis pendens, the requirements of both In case of subsequent sale or transfer, the Register of Deeds
Section 79 of Act No. 496 (now Sec. 76, P.D. No. 1529) and Section is duty bound to carry over the notice of lis pendens on all new
Lis pendens is the Latin term for pending suit or litigation. 14 Rule 14, of the Rules of Court, should be taken into account titles to be issued. The act of a Register of Deeds in erasing the
This is synonymous to litis pendencia as used in Spanish law. It together, as the latter not only supplements but also clarifies some notice of lis pendens, in plain violation of his duty, constitutes
indicates the control which a court has, during the pendency of an points in the former. For instance, it will be noted that not only the misfeasance in the performance of his duties for which he may
action, over the property involved therein. plaintiff may file a notice of lis pendens, but even the defendant when be held civilly and even criminally liable for any prejudice caused
affirmative relief is claimed in his answer. to innocent third parties, and cannot affect those who are
According to Escriche, litis pendencia produces the effect of a protected by the notice inscribed in the title of origin. 8
legal impossibility of alienating the property in dispute during the Furthermore, the annotation of a notice of lis pendens on a
pendency of the suit. This should not be taken literally under all certificate of title, by virtue of guardianship proceedings to declare Purchaser pendente lite not considered purchaser in
circumstances. The ultimate result of a pending litigation may be the person whose name appears thereon as owner incompetent to good faith
for or against the owner of the property in dispute, and it is not dispose of her properties, is proper, notwithstanding the absence of
strange to find a person coming along who is willing to gamble and such proceedings among the listed cases wherein lis pendens may be A purchaser of registered land who takes a certificate of
take the risk in exchange for a good bargain. Thus, a property annotated.3 title for value and in good faith holds an indefeasible title to the
object of a lis pendens may still be sold, except that the purchaser land. But a purchaser who buys registered land with full notice of
who takes it does so subject to the final outcome of the pending Adverse claims of ownership over property belonging to the the fact that it is in litigation between the vendor and a third
suit. decedents estate must be ventilated in an independent action, and party is not a purchaser in good faith within the meaning of
the probate court should proceed to the distribution of the estate, if Section 39 of the Land Registration Act, but stands in the shoes
Registration of lis pendens. there are no other legal obstacles to it, for after all, such distribution of his vendor and his title is subject to the incidents and result of
must always be subject to the results of the suit. For the protection of the pending litigation; and his transfer certificate of title will, in
No action to recover possession of real estate, or to quiet the the claimant, the appropriate step is to have the proper annotation of that respect, afford him no special protection. 9
title thereto, or to remove clouds upon the title thereof, or for the lis pendens entered.4
partition or other proceeding of any kind in court affecting the title Again, it has been held that a transferee pendente lite
to real estate or the use and occupation thereof or the buildings What constitutes constructive notice stands exactly in the shoes of the transferor and is bound by any
thereon, and no judgment or decree, and no proceeding to vacate judgment or decree which may be rendered for or against the
or reverse any judgment or decree, shall have any effect upon When the notice of lis pendens filed in the Office of the Register transferor. The con-tention that the petitioners must be regarded
registered land as against persons other than the parties thereto, of Deeds has been annotated on the back of the original copy of the as innocent purchasers for value within the meaning of Section
unless a memoran-dum stating the institution of such action or corresponding certificate of title, it is deemed sufficient to constitute 38 cannot be sustained. They acquired their interest in the land
proceeding and the court wherein the same is pending, and the constructive notice to purchasers or other persons subsequently deal- before any final decree had been entered; the litigation was,
date of the institution thereof, containing also a reference to the ing with the same property.5 The annotation of such notice on the therefore, in effect, still pending and it appears that they were
number of the certificate of title of the land affected, and the owners duplicate certificate of title is not an indispensable requisite, aware of that fact. Under these circumstances, they can hardly
volume and page of the registration book where it is entered, shall inasmuch as such title is not presented to the Register of Deeds until be considered innocent purchasers in good faith. 10
have been filed and registered.1 after some delays and not infrequently until so ordered by the Court. Doctrine of lis pendens not applicable to certain
Thus, it was held that a notice of lis pendens is an involuntary trans- cases.
On the other hand, Rule 14, Section 24, of the Revised Rules action, entry of which in the day book of the Register of Deeds being
of Court, provides that in an action affecting the title or the right of sufficient notice of the claim, without need of its annotation on the By express provision of law, the doctrine of lis pendens does
possession of real property, the plaintiff, at the time of filing of the back of the owners duplicate certificate of title, and while such notice not apply to attachments, levies of execution, or to proceedings
complaint, and the defendant, at the time of filing his answer, when should be annotated on the corresponding original copy of the certifi- for the probate of wills, or for administration of the estate of
affirmative relief is claimed in such answer, or at any time cate of title, this is an official duty of the Register of Deeds which may deceased per-sons in the Court of First Instance. 11 Also, it is held
afterwards, may record in the office of the Register of Deeds of the be legally presumed to have been regularly performed.6 generally that the doctrine of lis pendens has no application to a
province in which the property is situated notice of the pendency of proceeding in which the only object sought is the recovery of a
the action, containing the names of the parties and the object of Effect of lis pendens upon future transactions money judgment, though the title or right of possession to
the action or defense, and a description of the property in that property may be incidentally affected. It is essential that the
province affected thereby. From the time only of filing such notice Once a notice of lis pendens has been duly registered, any can- property be directly affected, as where the relief sought in the
for record shall a purchaser, or encumbrancer, of the property cellation or issuance of the title of the land involved as well as any action or suit includes the recovery of possession, or the
affected thereby be deemed to have constructive notice of the subsequent transaction affecting the same, would have to be subject enforcement of a lien, or an adjudication between conflicting
pendency of the action, and only of its pendency against the parties to the outcome of the litigation. In other words, upon the termination claims of title, possession, or right of possession to specific
designated by their real names. But as against transferees who are of the litigation there can be no risk of losing the property or any part property, or requiring its transfer or sale.12
65
this is comparable with an order refusing to annul a preliminary such notice of lis pendens is not for the purpose of molesting the
It may be possible also that the case when commenced may attach-ment which is considered likewise interlocutory.19 But suppose adverse party and that it is necessary to protect his rights. 23
justify a resort to lis pendens, but that during the progress thereof, the motion to cancel such lis pendens was filed as at incidental matter
it develops purely a personal action for damages or otherwise. In after original registration pursuant to Section 108 of P.D. No. 1529? Although the cancellation of a notice of lis pendens on a
such event, the notice of lis pendens has become functus officio. Here it would seem that the order can be appealed immediately for Torrens title may have been improper, such notice can no longer
there will be no judgment on the main case that can be awaited in the be inscribed on the subsequent title of an innocent purchaser for
Object of doctrine. registration proceeding. value.24 A notice of lis pendens can validly affect the right of a
subsequent purchaser only if the notice has been properly
The object of the doctrine of lis pendens is chiefly to keep the How lis pendens may be discharged. annotated on the back of the cor-responding certificate of title.
subject matter of the litigation within the power of the court until Where the notice cannot be annotated because it does not
the entry of final judgment, so as to prevent the defeat of the latter At any time after final judgment or decree in favor of the designate the correct subsisting certificate of title and is directed
by subsequent alienation. The vendee is bound by the judgment or defend-ant or any other party against whom the lis pendens was against a nonexistent title or one which has been can-celled or
decree, whether he is a bona fide purchaser for value or not; registered, or other disposition of the action such as to terminate superseded by another at the time of the filing of the notice,
conse-quently, as it is designed for the preservation of the subject finally all rights of the plaintiff, or the person at whose instance it was mere recording thereof in the Day Book produces no effect. 25
matter of the litigation, it can be applicable only where this relates registered, in and to the land and buildings involved, in any case in
to specific property which will necessarily be affected by the which a memorandum has been previously registered, a certificate of When lis pendens may be continued.
determination of the suit.13 the clerk of court in which the action or proceeding was pending,
stating the manner: of disposal thereof, shall be sufficient for Although a notice of lis pendens has been registered and
It may be stated, in this connection, that the notation of lis registration to cancel or discharge the lis pendens.20 accordingly annotated on a certificate of title subsequent to a
pendens creates only a contingency and not a right or lien that mortgage lien, where the validity of the mortgage itself is raised
does not exist; it only means that a person who purchases or Under the Rules of Court, a notice of lis pendens may be can- in issue in the pending litigation, the preservation of the superior
contracts on the property in dispute does so subject to the result of celled only upon order of the court, after proper showing that the right established under such a pre-existing mortgage as against
the pending litigation. notice is for the purpose of molesting the adverse party, or that it is subsequent transferees or other encumbrancers will be
not necessary to protect the rights of the party who caused it to be dependent upon the final result of said pending litigation. While it
Cancellation of lis pendens during pendency of recorded.21 Under Section 77 of Presidential Decree No. 1529, how- is to be admitted that as a general rule the notice of lis pendens
action. ever, a notice of lis pendens may also be cancelled by the Register of cannot affect the mortgagees right whose mortgage was
Deeds upon verified petition of the party who caused the registration annotated prior to the notice, and to that extent his right is
While ordinarily a notice of pendency which has been filed in a thereof. Aside from this, courts can cancel a notice of lis pendens only protected by law as against subsequent transferees and
proper case cannot be cancelled while the action is pending and on the aforesaid two grounds. The doctrine of lis pendens is founded encumbrancers, yet this principle cannot preclude the
undetermined, the proper court has the discretionary power to upon reasons of public policy and necessity, the purpose of which is to continuance of the notice of lis pendens where the property
cancel it under peculiar circumstances, as, for instance, where the keep the properties in litigation within the power of the court until mortgaged is actually involved in the litigation and precisely it is
evidence so far presented by the plaintiff or the party who applied the litigation is over, and to prevent the defeat of the judgment or the validity of the mortgage that has been raised in issue. 26
therefor does not bear out the main allegations of his complaint or decree by subsequent alienation. This purpose would be rendered Hence we have here an instance where the notice of lis pendens
answer, and where the continuances of the trial, for which said meaningless if a party is allowed to file a bond, regard-less of the may be continued until the pending case is dismissed or
property is re-sponsible, are unnecessarily delaying the amount, in substitution of said notice. Moreover, the law does not otherwise disposed of against the party at whose instance the
determination of the case to the prejudice of the owner affected. 15 authorize a judge to cancel a notice of lis pendens pending litigation, doctrine was invoked.
If these peculiar circumstances are present and the court orders upon the mere filing of a sufficient bond by the party on whose titles
the cancellation of the notice of lis pendens, it cannot be charged said notice is annotated. Annotation of the notice of lis pendens is Another instance that may justify the continuance of a
that there was an abuse of discretion. 16 On the other hand, the essential, considering the intention of a party to preserve his notice of lis pendens is where the party seeking its cancellation
court would be committing grave abuse of discretion in ordering the properties for sentimental reasons, in case he is adjudged the lawful relies upon an earlier transaction involving the same property but
cancellation of a notice of lis pendens on a certificate of title where owner thereof.22 which was not registered. Thus, it was held that where the
there was no unnecessary delay attributable to plaintiff and his registered owners are sued by a third party concerning or
counsel in the resolution of the main issue for annulment of said However, it was held that an order directing the cancellation of involving the lots sold by them to other persons by means of
certificate, especially when such cancellation was ordered without lis pendens should be set aside: (1) If it was granted ex parte; (2) If deeds of sale which were never registered and the party who
notice to plaintiffs counsel.17 In case of such abuse, the the order dismissing the complaint has not yet become final, for in filed the suit has caused a notice of lis pendens to be annotated
cancellation of the lis pendens during the pendency of the action is that case it may open the floodgates to the commission of fraud; or on the back of the certificate of title covering the lots sold, such
not justified, and may be reinstated by certiorari.18 (3) If there is no showing that the notice of lis pendens is only for the notice cannot be cancelled upon motion of the vendors or the
purpose of molesting the adverse party, or that it is not necessary to vendees predicated upon the fact that said vendees had acquired
However, where a motion to cancel a notice of lis pendens an- protect the rights of the party who caused it to be registered. Notice the lots prior to the date of the registration of the notice of lis
notated on a certificate of title has been denied by the court, the to the party who caused the lis pendens to be recorded is essential so pen-dens. Now, if the judgment is subsequently rendered in
order denying it being interlocutory cannot be subject of appeal that he may be given a chance to be heard and show to the court that favor of the plaintiff, the unregistered right acquired by the
until the judgment on the main case shall have been rendered and vendees in the lots sold to them is subject or subordinate to
66
plaintiffs right under the judgment, but, if said judgment is adverse would be that land conflicts could be even more numerous and ment necessary to give effect to its judgment or decree, and may
to the plaintiff, then the notice of lis pendens annotated on the complex than they are now and possibly also more abrasive, if not require the registered owner to deliver his duplicate certificate to
certificate of title loses its ef-ficacy or is ipso facto cancelled.27 even violent. (AFP Mutual Benefit Association, Inc. vs. CA, et al.; Solid the plaintiff to be cancelled or to have a memorandum entered
Homes, Inc. vs. Investco, Inc., 364 SCRA 768). upon it by the Register of Deeds. In case the person required to
The fact that the sale of the property in dispute is necessary execute any deed or other instrument necessary to give effect to
for the payment of estate and inheritance taxes is not a legal Registration of judgment. the judgment or decree is absent from the Philippines, or is a
justification to cancel the lis pendens because the annotation minor, or insane, or for any reason not amendable to the process
thereof cannot in any manner prevent the probate court from After having secured a judgment annulling a sale and ordering of the court, the court passing the judgment or decree may
selling the land in question if it believes necessary to do so to apply the cancellation of the registration thereof, such judgment may be appoint some suitable person as trustee to execute such
the proceeds of the sale to the payment of said taxes, but by force registered. Thus, Section 78 of P.D. No. 1529 provides that whenever instrument, and the same when executed shall be registered and
of law, since the property is still under litigation, the sale should be in an action to recover possession or ownership of real estate or any shall have force and effect to bind the land to be affected
subject to the lis pendens.28 interest therein affecting registered land, judgment is entered for the thereby.31
plaintiff, such judgment shall be entitled to registration on presenta-
Lis pendens; Pencil markings are not an accepted form of tion of a certificate of the entry thereof from the clerk of court where Registration of final decree of partition.
annotat-ing a notice of lis pendens. the action is pending to the Register of Deeds for the province where
the land lies, who shall enter a memorandum upon the certificate of In all proceedings for partition of registered land, after the
Pencil markings, which even petitioner admits to be title of the land to which such judgment relates. If the judgment does entry of the final judgment or decree of partition and the filing of
provisional, are not an accepted form of annotating a notice of lis not apply to all the land described in the certificate of title, the the report of the committee or commissioners and final judgment
pendens. The Court cannot accept the argument that such pencil certificate of the clerk of court where the action is pending and the thereon, a copy of the final judgment or decree, certified by the
annotation can be considered as a valid annotation of notice of lis memorandum entered by the Register of Deeds shall contain a de- clerk of the court rendering the same, shall be filed and
pendens, and thus an effective notice to the whole world as to the scription of the land affected by the judgment. registered; and, thereupon, in case the land is set off to the
status of the title of the land. The law requires proper annotations, owners in severally, any owner shall be entitled to have his
not provisional an-notation of a notice of lis pendens. (AFP Mutual The non-registration of the judgment within sixty days after the certificate entered to the share set off to him in severally, and to
Benefit Association Inc. vs. CA, et al.; Solid Homes, Inc. vs. rendition thereof, as required by Section 79 of the Land Registration receive an owners duplicate thereof. In case the land is ordered
Investco, Inc., 364 SCRA 768). The reason is that we allow Act, does not render the notice of lis pendens ineffective. Even if it by the court to be sold, the purchaser or his assigns shall be
provisional annotations as a valid form of annotation of lis pendens, does, the judgment is still binding on the parties to the suit and their entitled to have a certificate of title entered to him or to them on
we would be eroding the very value of the indefeasibility of the successors-in-interest, but not as against other persons. 29 presenting the deed of the commissioners or committee for
torrens system. registra-tion. In case the land is ordered by the court rendering
Execution of judgment in action to recover title. the judgment to set off in entirety to one of the parties upon
There could be no valid annotation on the titles where the payment to the other parties to the action, the party to whom
case used as basis of the annotation pending with the trial court is When in any action to recover the possession of or title to real the land is thus ordered to be set off shall be entitled to have a
an ac-tion for collection of a sum of money and does not involve estate or interest therein execution has been issued directing the certificate of title entered to him on presenting a copy of the
the titles to, possession or ownership of the subject property or an officer to place the plaintiff in possession of the land affected by the judgment or decree certified by the clerk of the court rendering
interest therein. judgment on which the execution was issued, the officer shall cause the same: Provided, however, That any new certificate entered in
an attested copy of the execution, with a return of his doings thereon, pursuance of partition proceedings, whether by way of set off or
The reason is that such action did not directly involve titles to, to be filed and registered within three months after the service, and of assignment shall contain a reference to the final judgment or
ownership or possession of the subject property, and, therefore, before the return of the execution into the office of the clerk when it decree of partition, shall be conclusive as to the title to the same
was not a proper subject of a notice of lis pendens. is-sued, and the plaintiff, in case the judgment was that he was extent against the same person as such judgment or decree is
entitled to an estate in fee simple in the demanded premises or in any made conclusive by the laws applicable thereto: And Provided,
Reason for adoption of the Torrens System. part thereof, and for which execution issued, shall thereupon be also, That any person holding such certificates of title or transfer
entitled to the entry of a new certificate of title and to a cancellation thereof shall have the right to petition the court at any time to
The Torrens System was adopted in this country because it of the certificate and owners duplicate certificate of the former cancel the memorandum relating to such judgment or decree,
was believed to be the most effective measure to guarantee the registered owner. If the former registered owner neglects or refuses and the court, after notice and hearing, may grant the
integrity of land titles and to protect their indefeasibility once the within a reasonable time after request to produce his duplicate application. Such certificate shall thereafter be conclusive in the
claim of owner-ship is established and recognized. If a person certificate in order that the same may be cancelled, the court, on same manner and to the same extent as other certificates of
purchases a piece of land on the assurance that the sellers title application and after notice, shall enter an order to the owner to title.32
thereto is valid, he should not run the risk of being told later that produce his certificate at the time and place named therein, and may
his acquisition was ineffec-tual after all. This would not only be enforce the order by suitable process.30 When partition of land or buildings is subject to
unfair to him. What is worse is that if this were permitted, public mortgage or lease.
confidence in the system would be eroded and land transactions Every court passing a judgment or decree in favor of the plaintiff
would be attended by complicated and not necessarily conclusive affecting registered land shall, upon application of the plaintiff, order When a certified copy of a judgment or decree making final
investigations and proof of ownership. The further consequence any parties before it to execute for registration any deed or instru- parti-tion of land or buildings is presented for registration, if a
67
mortgage or lease affecting a specific portion or an undivided share purpose. The Register of Deeds thereupon makes a memorandum of
of the premises had previously been registered, the mortgagee or the right or interest taken, on each certificate of title, and where the
tenant claiming under the mortgagor or lessor, shall cause the fee simple is taken a new certificate is entered to the owner for the
mortgage or lease and any duplicate certificate of title issued to the land remaining to him after the segregation, and a new certificate
mortgagee or lessee to be again presented for registration, and the entered to the govern-ment, municipality, or corporation, or other
Register of Deeds shall endorse on each the memorandum of such authority exercising such right for the land so taken. All fees on
partition, with a descrip-tion of the land set off in severally on account of any memorandum of registration or entry of new
which such mortgage or lease remains in force. Such mortgagee or certificates are chargeable against the authority taking the land.
tenant shall not be entitled to receive his own duplicate certificate
of title until such mortgage or lease has been so presented for Right of owner, pending expropriation.
registration.33
In a case where the City Engineer refused to permit a landowner
Assignee in bankruptcy proceedings entitled to new certifi- to construct a building on his lot, alleging that part of it was affected
cate. by a proposed widening of street approved by the National Urban
Planning Commission, it was held that the plans adopted by said
As provided by Section 86 of Act No. 496 (now Sec. 83, P.D. Commission could not legally affect the construction of residential
No. 1529), whenever proceedings in bankruptcy or insolvency, or buildings, like the one herein in question, that are not subsidized in
analo-gous proceedings are instituted against a debtor who is an whole or in part with public funds, citing Section 6 of Executive Order
owner of registered land, it shall be the duty of the officer serving No. 98, series of 1946; that so long as the petitioner complies with all
the notice of the institution of such proceedings on the debtor to the requisites of the Revised Ordinances of the City of Manila, the
file a copy thereof in the Register of Deeds for the province wherein refusal to grant the building permit solicited would amount to denying
the land of the debtor lies. The assignee or trustee appointed by him unlawfully the right to the beneficial use of his property; and that
the court having jurisdiction thereof in such proceedings shall be the City of Manila having not expropriated the strip of the petitioners
entitled to the entry of a new certificate of registered land of the land affected by the proposed widening, and there being no legislative
debtor upon presenting and filing a certified copy of the order authority to establish a building line, the denial of the building permit
appointing him such assignee or trustee, with the debtors duplicate would amount to the taking of private property for public use under
certificate of title; the new cer-tificate shall state that it is entered the power of eminent domain without following the procedure
to him as assignee or trustee in insolvency or bankruptcy or other prescribed for the exercise of such power.35
proceedings, as the case may be.
By the same token, neither may a legal easement be created
Title of assignee or trustee returned in case proceedings and imposed upon private land without giving just compensation to
are vacated. the owner thereof. Thus, in a case where a certain easement
established by law was not pre-existing at the time of the registration
Whenever proceedings of the character named in Section 86, of the land, and then it is sought to be imposed thereon after the land
Act No. 496, against a registered owner, of which notice has been has been registered under the Torrens system, it was held that proper
registered, are vacated by decree or judgment, a certified copy of expro-priation proceedings should be had and just compensation paid
the decree or judgment may be filed and registered. If a new the registered owner thereof, it being elementary that, without them,
certificate has been entered to the assignee or trustee as registered public use may not be imposed on private property.36
owner, the debtor shall be entitled to the entry of a new certificate
to him, and the certificate of the assignee or trustee shall be oOo
surrendered.34

Registration of eminent domain.

Whenever any land of a registered owner, or any right or


inter-est therein, is taken eminent domain, Section 85 of P.D. No.
1529 requires the government or municipality or corporation or
other authority exercising such right to file for registration in the
proper province a description of the registered land so taken, giving
the name of each owner thereof, referring by number and place of
registration in the registration book to each certificate of title, and
stating what right or interest in the land is taken, and for what
68
Chapter XVII In order that an executor or administrator may, in the course of in the case of a transfer pursuant to deed filed in the Registry of
TRANSMISSION BY DESCENT AND DEVISE administration, sell or transfer registered land of the estate, for the Deeds.
payment of debts or for any other purpose, an order of the court need
Estate passes to executor upon death of registered owner. be secured for the necessary authority. However, such author-ity may Transfer of land in name of executor not necessary.
be dispensed with; according to Section 91 of Act No. 496, if in the
Lands and any estate or interest therein registered under the will the land is devised to an executor to his own use or upon such When the will of a deceased owner of registered land, or
Land Registration Act shall, upon the death of the owner, go to the trust or giving him tower to sell. any estate or interest therein, empowers the executor to sell,
executor or administrator of the deceased in like manner as convey, encumber, charge, or otherwise deal with the land, it
personal estate, whether the owner dies testate or intestate, and However, without any court authority first secured, an heir may shall not be necessary for such executor to be registered as
shall be subject to the same rules of administration as if the same sell his share in the inheritance provided such transaction shall be owner, but a certified copy of the will and letters testamentary
were per-sonally, except as otherwise provided in the law, and subject to the final distribution of the estate. While such land in being filed with the Reg-istry of Deeds, such executor may sell,
except that the rule of division shall be provided by will. 1 This custodia legis could not ordinarily be levied upon, it does not neces- convey, encumber, charge or otherwise deal with the land
should be understood simply to mean that the administrator is sarily mean that an heir may not sell the right, interest or participa- pursuant to the power in like manner as if he were the registered
vested with ownership only as a trustee since the true owners are tion which he had or might have in the land under administration. The owner, subject to the like conditions as to the trusts, limitations,
the testamentary or legal heirs, as the case may be. 2 ordinary execution of property in custodia legis is prohibited in order and conditions expressed in the will as in case of trusts,
to avoid interference with the possession by the court. But the sale limitations and conditions expressed in a deed. 9
Judicial proceeding when not necessary. made by an heir of his share therein, subject to the result of the
pending administration, in no wise stands in the way of such A person who buys land appearing in the name of the
According to the courts interpretation of Sec. 89 et seq. of Act administration.6 heirs of a deceased, buying same from an administrator of the
No. 496, lands registered under the Torrens system or under the estate duly appointed as such and authorized to sell by the court,
provisions of the Cadastral Act may, upon the death of the Notice to heirs essential. is a buyer in good faith and the sale made to him should not be
registered owner, thereof, be apportioned and divided among his disturbed. He has the right to presume that orders issued by the
heirs and the assignees of the latter without the necessity of Sections 2 and 4, Rule 89 of the Rules of Court, regulate sales, court in such cases are legal.10
instituting intestate proceeding of the said deceased. 3 mortgages, and other encumbrances of real property of decedents.
The law requires expressly not only that the sale, mortgage, or other Court order authorizing sale subject to appeal.
Thus, in the absence of debts existing against the estate, the encumbrance be beneficial to the heirs but also that written notice of
heirs may enter upon the administration of said estate immediately. the application as well as of the time and place of its hearing should An order for a license to sell real estate in administration
And if they desire to partition it among and between themselves, be served upon them. And it has been repeatedly held in this jurisdic- proceedings is in the nature of a judgment upon the issues
and can do so by mutual agreement, they also have that privilege tion that without such notice the sale is void. 7 involved and an appeal may be taken therefrom as in the case of
under Rule 74, Section 1, of the Rules of Court. Especially where any other judgment.11 Any defect or infirmity in the order of the
there are no debts existing against the estate, there is certainly no Court authority needed in order to mortgage or lease. court in ad-ministration proceedings is properly curable by
occasion for the intervention of an administrator in the settlement appeal, and unless this remedy is availed of in due time a redress
and partition of the estate among the heirs. When the heirs are all After a memorandum of the will, letters testamentary, or letters cannot be sought by petition for a writ of certiorari.
of legal age and there are no debts, there is no compelling reason of administration has been entered upon the register, the executor or
why the estate should be burdened with the cost and expenses of administrator may deal with mortgages, leases, and other personal Filing of court declaration of heirs.
an administra-tor.4 interests in or upon registered land as if he were the registered owner
thereof, according to Section 92 of Act No. 496 (now Sec. 88, P.D. No. Before making distribution of undevised registered land, the
Will and letters of administration to be recorded. 1529), subject to the approval of the Court in cases where the Rules executor or administrator is required by Section 95 of Act No.
of Court so require. It may be stated, in this connection, that with 496 to file in the office of the Register of Deeds a certified copy
Where a testate or intestate proceeding has been instituted in respect to leases, according to a decision of the Supreme Court, a ju- of the final decree of the court having jurisdiction of the estate,
court, before the executor or administrator may deal with any dicial administrator can validly lease property of the estate without which shall be conclusive evidence in favor of all persons
regis-tered land or interest therein of the deceased owner, he is prior judicial authority and approval.8 thereafter dealing with the land that the persons therein named
required to file with the office of the Register of Deeds a certified as the only heirs at law of the deceased owner are such heirs.
copy of his let-ters of administration or, if there is a will, a certified When executor may transfer land of estate to himself.
copy of the will, including the order allowing the same, and of the Registration of sale by executor.
letter testamentary or of administration with the will annexed, in Where registered land is devised to the executor to his own use,
order that the Register of Deeds may enter upon the certificate of or upon some trust, and this is so stated in the will, copy of which Whenever the court having jurisdiction of the settlement of
title a memorandum with reference thereto by their file number and with letters testamentary is filed with the Registry of Deeds, Section the estate shall, for the purpose of distribution thereof or for
date of filing.5 93 of Act No. 496 (now Sec. 89, P.D. No. 1529) permits the executor other purposes provided by law, order registered land or any
to have the land transferred to himself upon the register in like interest or estate therein to be sold by the executor or
Court authority needed in order to sell. manner and subject to like terms and conditions and to like rights as administrator, upon the filing of a certified copy of the order of
sale and the deeds executed in pursuance of the same in the
69
Registry of Deeds, a transfer of the land, estate or interest to the devisees or heirs or tenants in common, or otherwise, as shall appear creditors, heirs or other persons deprived of lawful participation
purchaser may be made upon the register as in the case of other to the court to be most con-venient, consistently with the rights of in the estate for a period of two years from and after the date of
sales by deed, and the original certificate and owners duplicate the parties, or as the parties interested may agree. A certified copy of the distribution thereof in accordance with Section 4 of Rule 74.
shall be cancelled and a new certificate and owners duplicate the final order, judgment, or decree of the court having jurisdiction of
issued to the purchaser.13 the estate making final distribution shall be filed with the Registry of It is further required that the fact of the extrajudicial
Deeds and thereupon new certificates and owners duplicate settlement be published in a newspaper of general circulation in
Transfer to heirs or devisees in anticipation of final certificate shall be issued to the parties severally entitled thereto in the province or city once a week for three consecutive weeks.
distribu-tion. accordance with such order, judgment, or decree, but nothing in this However, the settle-ment shall not be binding upon any person
section contained shall in any way affect or impair existing who has not participated therein or had no notice thereof.
Whenever, after the final determination of the amount of all requirements of law as to notice to be given to all parties interested in
claims against the estate of the deceased, it shall be made to the estate of a deceased person before final decree of distribution After the expiration of two years, those persons who have
appear to the court having jurisdiction of the estate that the estate thereof.16 par-ticipated or taken part or had notice of the extrajudicial
will justify it and the proof of heirship has been made clear to that partition shall be barred to question or object to the extrajudicial
court, it may direct the executor or administrator to make over and Before the approval of the partition of the estate, however, an settlement. Thus, it was held that it is not a bar against third
transfer to the devisees or heirs, or some of them, in anticipation of heir may validly sell lots forming part of his share of the estate of the persons who were not parties thereto inasmuch as Rule 74,
final distribution, a portion or the whole of the registered land to deceased, especially when the sale has been expressly recognized by Section 4, of the Rules of Court is not meant to be statute of
which they might be entitled on final distribution; and upon the his co-heirs. In the event that there are obligations of the estate limitations, explaining that an extrajudicial partition being an ex
filing of a certified copy of such order in the Registry of Deeds, the remaining unpaid, a notation of a lien in favor of the estate may be parte proceeding, it cannot by any reason or logic be contended
executor or administrator may cause such transfer to be made made on the certificate of title to said lots to guarantee that all the that such settlement or distribution would affect third persons
upon the register in like manner as in case of a sale, and a obligations of the estate will be met.17 who had no knowledge either of the death of the decedent or of
certificate and owners duplicate certificate shall be issued to the the extrajudicial settlement or affidavit. 20 Of course, it may be
devisees or heirs entitled thereto as in other cases. The land so Extrajudicial settlement of estate. understood that such knowledge may be acquired actually or
transferred shall be held free from all liens or claims against the constructively and in the latter case by registration in the manner
estate. In the proceedings to procure such order or directions, such According to Rule 74, Section 1, of the New Rules of Court, the provided by law.
notice shall be given to all parties in interest as the court having estate of a decedent may be partitioned or settled extrajudicially by
jurisdiction of the estate may direct. 14 agreement between the heirs if the following conditions are present, Where an extrajudicial settlement of estate was executed
namely: (a) that the decedent died intestate; (b) that he left no by a co-heir, alleging to be the sole and only heir in fraud of his
It may not be amiss to state, however, that partial distribution debts; and (c) that the heirs are all of legal age, or if there be any co-heirs, and accordingly a title was issued in his name alone, in
of the decedents estate pending the final determination of the minors they be represented by their judicial or legal representatives effect he repudiates the co-ownership. Since the issuance of the
testate or intestate proceedings should as much as possible be duly authorized for the purpose. Without securing letters of title to him is a constructive notice of adverse claim to his co-
discouraged by the courts, and unless in extreme cases, such form administra-tion, the heirs may divide the estate among themselves as heirs, the latter may institute an action to recover on the ground
of advances of inheritance should not be countenanced. The reason they see fit by means of a public instrument to be filed with the office of fraud within four years, instead of two years, from the date of
for this strict rule is that the courts should guard with utmost zeal of the Register of Deeds. But should they disagree, they must have to registration on the ground of fraud, provided the property has
the estate of the decedent to the end that the creditors be file in court an ordinary action of partition. If there is only one heir, he not passed to an innocent purchaser for value; otherwise, the co-
adequately protected and rightful heirs assured of their shares in may adjudicate to himself the entire estate by means of an affidavit heirs deprived will be barred by prescrip-tion.21
the inheritance. Thus, it was held that an order of partial to be filed with the office of the Register of Deeds. An extrajudicial
distribution is unwarranted where it was prematurely issued, the partition is valid as between the participants even if the requisites of While it may be true that an extrajudicial partition is an ex
period for the presentation of claims not having as yet elapsed, and Rule 74, Sec. 1, are not followed, since said requisites are for parte proceeding, yet after its registration under the Torrens
no bond was fixed by the court as a condition precedent to the purposes of binding creditors and non participating heirs only.18 system and the annotation on the new certificate of title of the
partial distribution ordered by it.15 contingent liability of the estate for a period of two years as
While minors may be represented by a guardian, the latter can- prescribed in Rule 74, Sec-tion 4, of the Rules of Court, by
Registration of final distribution of estate. not, upon his own authority alone, execute acts of disposition. Thus, it operation of law a constructive notice is deemed made to all the
was held that an abdicative waiver of rights by a guardian, being an world, so that upon the expiration of said period all third persons
For the purpose of final distribution of the estate the court act of disposition and not of administration, cannot bind his wards, should be barred to go after the particular property, except
having jurisdiction thereof may determine the rights of all persons being null and void as to them unless duly authorized by the proper where title thereto still remains in the names of the alleged heirs
in registered lands or any estate or interest therein of the court.19 who executed the partition tainted with fraud, or their
deceased, declare and enforce the rights of the devisees, heirs, transferees who may not qualify as innocent purchasers for
surviving hus-bands or wives, and others, and make partitions and Whenever personal property is involved, the public instrument or value. If the liability of the registered property should extend
distribution according to the rights of the parties, and may give affidavit to be filed with the Registry of Deeds need be accompanied indefinitely beyond that period, then such constructive notice
direction to the executor and administrator as to the transfer of with a bond in an amount equivalent to the value of the personal which binds the whole world by virtue of registration would be
registered lands and any estate or interest therein to the devisees prop-erty as certified under oath by the parties concerned and meaningless and il-lusory. We are, of course, not concerned here
or heirs, and may direct the transfer to be made to the several conditioned upon the payment of any just claim that may be filed by
70
about unregistered land and, much less, personal property which The statute of frauds does not operate on partition agreement
may likewise be object of an extrajudicial partition. and the reason for this is that a partition is not a conveyance but
simply a separation and designation of that part of the land which
Thus, in a case involving registered land it was held that the belongs to the tenant in common. 26 In other words, in such
lien created by Rule 74, Section 4 of the Rules of Court is effective transaction between heirs, there is no change of ownership but simply
only for a period of two years. Accordingly, where the land object of a designa-tion and segregation of that part which belongs to each
extrajudicial settlement of estate was sold to an innocent purchaser heir. Hence, an agreement of partition, though oral, is valid and
for value by the alleged heir to whom a certificate of title was consequently binding upon the parties.27
issued containing a memorandum regarding the liability of the
distributees and estate, and more than two years had elapsed since oOo
the date of the issuance of said certificate of title, the right of the
transferee to have such lien as carried over on his certificate of title
cancelled became vested on him and that the same had become
functus officio.22

In a certain leading case 23 decided by the Supreme Court, the


cancellation of such statutory lien annotated on a certificate of title
was taken cognizance of as within the authority of the court under
Section 112 of Act No. 496, and may properly be denied before the
expiration of the two-year period even if a surety bond is put up by
the petitioner to answer for the contingent claim. However,
according to present practices by Registers of Deeds, such lien may
be cancelled after the period, even without express order from the
court, upon presentation of a verified petition by the heirs as
registered owners or other party in interest, showing that there
exists no claim against the estate from any creditor, heir or other
persons.24

Oral partition of estate, when deemed valid.

It is of general knowledge that in the provinces, especially in


the barrios, when a person dies leaving small parcels of land not
covered by the Torrens system of registration, either through
ignorance of the law or in order to avoid expenses in the way of
legal services, notarial fees, and fees for registration, the heirs
merely come together, make a list of the properties included in the
estate, pay off small debts and sums advanced by some of the
heirs, specially for expenses incurred during the last illness of the
decedent and for his funeral, and then proceed to assign to each
one his share of the estate, even taking into account the last
instructions and wishes of the decedent. So far, this practice has
been found to be not only convenient and inexpensive, but even
advisable, and is accepted by the people, and there seems to be no
good reason for disturbing said practice. Hence, oral parti-tion or
renunciation of inheritance under such circumstances may be
deemed valid and binding on grounds of equity and when no rights
of creditors are involved. But when valuable properties, especially
those covered by certificates of title are involved in the partition,
perhaps strict compliance with the law may be advisable, even
necessary.25

71
Chapter XVIII to register or record original grants to public lands without receiving engaged in the performance of duties under the
ASSURANCE FUND the fee of one-tenth of one percent provided for in Section 99 of Act Land Registration Act, and/or other persons who
No. 496.3 committed fraud or other wrongful acts; or
Theory of the assurance fund.
Recording of ownership of building subject likewise to assur- By the registration of any other person as owner of
The theory of the assurance fund, according to William C. Ni- ance fund contribution. such land; or
black in his An Analysis of the Torrens System of Conveying Land
and Douglas J. Thom in his The Canadian Torrens System, may The ownership of a building erected on titled land leased from By the mistake, omission or misdescription in a cer-
be restated thus: another person is required to contribute to the assurance fund when tificate or owners duplicate, or in any entry or
the owner of said building obtains from the court an order for the reg- memo-randum in the register or other official
The act of registration is the operative act, and the istration of his ownership on the corresponding Torrens title. While book; or
trans-fer and vesting of the title is effected, not by the this requirement seems in the law to apply only to land, the word
execution of an instrument of transfer, not by the act of the land as used in the Land Registration Act is equivalent to land or By any cancellation.5
owner of the land, not by the transfer of a valid title by the buildings or improvements. The building as an interest in land is
transferor, but by the State acting through its officer the included in the contemplation of the law and given protection of the It is to be noted that the liability of the land registration assur-
Registrar; and because it transfers and vests the title by the assurance fund. It would be unfair if the registrant should enjoy the ance fund is not confined only to cases where the erroneous
issue of a certificate which is declared by statute to be protection of the assurance fund guarantee without contributing to its registra-tion is due to omission, mistake or malfeasance on the
conclusive evidence of an indefeasible title to the land, the maintenance.4 part of the employees of the registration court, but also extends
State creates a fund for the compensation of such person as Who are entitled to compensation from assurance fund? to all cases in which a person is wrongfully deprived of any land
may be injured by the divesting and cutting off of rights and or any interest therein, without negligence on his part, through
interests under this statutory declaration.1 In general, people who may have been victims of injustice the bringing of the land under the provisions of the Land
brought about by the harshness of the operation of the Torrens Registration Act.6
What constitutes the assurance fund. system of land registration are entitled to compensation payable from
the assurance fund. However, it is necessary that the following condi- In a case where the purchaser relied in good faith upon a
Upon the entry of a certificate of title in the name of the regis- tions concur: forged owners duplicate certificate of title with the original of
tered owner, and also upon the original registration on the which, also forged, surreptitiously inserted in, and made part of,
certificate of title of a building or other improvements on the land That the claimant, who must be an owner, purchaser or the registration book kept in the Office of the Register of Deeds,
covered by said certificate, as well as upon the entry of a certificate encumbrancer in good faith, suffered actual damage by the the Court of Appeals not seeing it proper to award the property
pursuant to any subsequent transfer of registered land, there shall loss of land or interest therein; to such victim of the fraud as against the true owner whose title
be paid to the Registry of Deeds one-fourth of one percent of the remained intact found it justi-fied to grant him due compensation
assessed value of the real estate on the basis of the last That no negligence is attributable to him; from the assurance fund.7
assessment for taxation pur-poses, as contribution to the assurance
fund. Where the land involved has not yet been assessed for That the loss or damage suffered was not occasioned by a Against whom action filed.
taxation; its assessed value shall be as determined by the sworn breach of trust (whether express, implied or construc-tive)
declaration of two disinterested persons, without prejudice to the or by any mistake in the resurvey or subdivision of If such action is brought to recover for loss or damage or
court increasing the value if it is too small. registered land resulting in the expansion of area in the for deprivation of land or of any estate or interest therein arising
certificate of title; wholly through fraud, negligence, omission, mistake or
The National Treasurer shall have the custody of the money misfeasance of the court personnel, Register of Deeds, his
collected as Assurance Fund which may be invested in the manner That the claimant is by the provisions of the Land Registra-tion Deputy, or other employees of the Registry in the performance of
and form authorized by law. The income of the Assurance Fund Act barred or in any way precluded from bringing an action their respective duties, the action shall be brought against the
shall be added to the principal until said fund aggregates to five to recover the land or the interest therein, or from Registrar and the National Treasurer as defendants, although the
hundred thousand pesos, in which event the excess income from obtaining compensation direct from the person responsible latter is not an indispensable party. But if there are private
investments as well as from collections of such fund shall be paid for the damage; persons involved in the above irregularities, such private persons
into the National Treasury to the account of the Assurance Fund. should be included as co-defendants. The Solicitor General in
The National Treas-urer is required to report annually to the That action to recover from the assurance fund has not person or by representative must appear and defend all such
Secretary of the Budget the condition and income thereof.2 prescribed; and suits to recover from the assurance fund, with the aid of the City
or Provincial Fiscal concerned. In every action filed against the
Recording of patent or grant of public lands also subject to That the loss or damage was due to any of the following assur-ance fund, the court shall consider the report of the
fee for assurance fund. causes: Administrator of Land Registration Authority.8

In a certain case of mandamus instituted against a Register of Thru the omission, mistake or misfeasance of the Clerk of
Deeds, it was held that said official was not required under the law Court or the Register of Deeds, or any em-ployees
72
Liability of National Treasurer when made joint defendant. Treasurer in behalf of the Government, and whatever may have been Trust contemplated has technical and more restrictive
recovered shall be paid into the National Treasury for the account of mean-ing.
Where there are defendants other than the National Treasurer, the as-surance fund.13
and damages have been awarded to plaintiff, the liability of the For want of better terms, the words trust and trustee are
National Treasurer shall be only secondary. Thus, Section 102 of Measure of damages. fre-quently used in a broad and popular sense so as to embrace
the Land Registration Act (now Sec. 97 of P.D. No. 1529) directs a large variety of relations. Thus, if a person obtains legal title to
that no final judgment shall be entered against the Treasurer until Section 106 of Act No. 496 (now Sec. 97 of P.D. No. 1529) fixes property by fraud or concealment, courts of equity will impress
execution against the other defendants shall have been returned the maximum damages that may be recovered as compensation in an upon the title a so-called constructive trust in favor of the
unsatisfied in whole or in part, and the officer returning the action against the assurance fund. It is not the assessed value nor the defrauded party. The use of the word trust in this sense is not
execution shall certify that the amount still due upon the execution actual value at the time of recovery, but an amount of not more than technically accurate. According to Perry, such trusts are not
cannot be collected except by application to the assurance fund. the fair market value of the real estate at the time of the loss, trust at all in the strict and proper significance of the word
damage, or deprivation thereof. trust; but as courts are agreed in administering the same
Action for damages or for reconveyance. remedy in a certain class of frauds, and as courts and the
The measure of damages to which one is entitled will in profession have concurred in calling such funds constructive
When the blame for failure to notify the parties of the hearing general be the value of the property of which the person com- trust, there can be no misapprehension in continuing the same
may be laid upon the clerk of court or his subordinates, an action pensated has been deprived of but not more than the actual loss phraseol-ogy while a change may lead to confusion and
for damages may be brought, as provided for in Sections 101 and incurred.14 The assurance fund was created to insure against misunderstanding.17 However, the term trust as used in Section
102 of Act No. 496. Besides said remedy and the petition for review damage or loss, not guarantee profit, let alone enormous profit. 101 of P.D. No. 1529 must be taken in its technical and more
within one year, there is still the other equitable remedy to pray the Its purpose is to relieve innocents persons from the harshness restricted sense.
court to compel the person in whose name the parcel of land has of the doctrine that a certificate is conclusive evidence of an
been wrongfully registered to reconvey it to the rightful owner, inde-feasible title to land, and from any injustice which may Bouvier defines a trust in its technical sense as a right to
provided, of course, that the parcel of land has not been arise to them by operations under the Act, making for the prop-erty, real or personal, held by one party for the benefit of
transferred to an in-nocent purchaser for value. 9 conclusiveness of a certificate, whether such injustice arises another. In the following case, there can be no trust in its
from the fraud or error of some one connected with the registry technical signification: The plaintiff was a minor at the time of
What to establish in action for damages due to deprivation office, or of some third person dealing with the land.15 the registration of the land and has no legal guardian. It is true
of land. Where to get fund if damages adjudged exceed assurance that her mother in whose name the land was registered was the
fund available. natural guardian of her person, but that guardianship did not
For an action against a private person seeking damages for extend to the property of the minor and con-ferred no right to
the wrongful deprivation of land, it must be established, first, that The amount that may be recovered in damages is not limited at the administration of the same, 18 and the plaintiff, being a minor
the claimant is in reality wrongfully deprived of his land by the any one time to P500,000 which is the sum fixed by law to be main- and under disability, could not create a technical trust of any
regis-tration in the name of another of the land by actual or tained by the National Treasurer as a standing fund for the purpose. kind. Applying Bouviers definition to this state of facts, it is clear
constructive fraud; second, that there was no negligence on his Under Section 103 of Act No. 496, as amended by Presidential Decree that there was no trust in its technical signification, because the
part; third, that he is barred or in any way precluded from bringing No. 1529, where the assurance fund at any time be not sufficient to mother had no right of property or administration in her
an action for the recovery of the land or interest therein; and, meet the amount called for by a judgment, the National Treasurer is daughters estate and was nothing but a mere trespasser. In this
fourth, that the action for compensation has not prescribed. 10 authorized to make up the deficiency from any other funds available case, therefore, the assurance fund was held liable. 19
in the Treasury not otherwise appropriated. In such event, any sums
It is important to note; in this connection, that in order to thereafter received by the National Treasurer on account of assur- The above conclusion may no longer hold true in the light of
entitle a person to receive damages from the assurance fund, one ance fund collected by Registries of Deeds shall be transferred to the the new Civil Code, particularly under the provisions of Articles
of the es-sential conditions is that the claimant should be a general funds, until the sum advanced on account of the deficiency in 320 and 326 designating the father, or in his absence the mother,
purchaser in good faith. 11 And a person who knowingly acquired a the assurance fund shall have been fully covered. as the legal administrator of the property of the child under
property affected by lis pendens is not a purchaser in good faith. 12 parental authority. The trust violated by the mother in the above
Consequently, if it develops that he was later deprived of the land Breach of trust and other causes not covered. case may now be prop-erly referred to as trust in its technical
he acquired, he has no recourse for damages from the assurance sense, and for the breach of such trust the assurance fund
fund. The assurance fund is not liable for such loss or damage as may cannot be held liable.
be occasioned by breach of trust, whether express, implied or
Recourse of Government after payment of damages from constructive, nor by mistake in the resurvey or subdivision of reg- Where and when to file action against assurance fund.
as-surance fund. istered land resulting in the expansion of area in the certificate of
title. Neither may it be liable for any loss or damage arising from the Under the Land Registration Act, actions for recovery of
In every case where the National Treasurer has made improper exercise of any sale in mortgage foreclosure proceedings, dam-ages from the assurance fund may be brought in any court
payment to plaintiff for damages from the assurance fund, the nor for any excess of the fair market value of the real estate at the of competent jurisdiction, that is, in the city or province where
Government shall be subrogated to all rights of said plaintiff against time of the loss, damage, or deprivation thereof.16 the defendant or the plaintiff resides at the election of the
any other parties or securities. Such rights shall be enforced by the latter.20 However, where the primary object of an action is to
73
nullify the title of the petitioner, and the alternative relief sought
therein is the recovery of damages from the assurance fund, such
alternative relief cannot affect the ap-plication of Rule 4, Section 2,
of the Rules of Court, inasmuch as the plaintiff cannot possibly
recover damages unless the petitioners title is declared valid, in
which event the venue is in the Court of First Instance where the
property or any part thereof lies.21

As to when to file, the time prescribed by Section 107 of Act


No. 496 (now Sec. 102 of P.D. No. 1529) is six years from the time
the right to bring or take such action or proceeding first accrued,
that is, from the moment the plaintiff actually suffered loss or
damage or was deprived of his property or interest therein. To this
period of prescription is excepted the case where at the time such
right of action first accrued the person entitled to institute the
proceedings was a minor, or insane, or imprisoned, in which case
such person or anyone claiming for or under him may bring the
action or institute the pro-ceeding at any time within two years
after such disability is removed, notwithstanding the expiration of
the regular period provided.

Register of Deeds to protect assurance fund.

When it appears that the assurance fund may be liable for


damages that may be incurred due to the unlawful or erroneous is-
suance of a certificate of title, the Register of Deeds concerned
shall be deemed a proper party in interest who shall, upon
authority of the Administrator of Land Registration Authority file the
necessary ac-tion in court to annul or amend the title. Accordingly,
the court may order the Register of Deeds to amend or cancel the
certificate of title or do any other act as may be just and
equitable.22

oOo

74
Chapter XIX jurisdiction to pass upon such controversial issue. Here, the Supreme registered was frivolous or vexatious, it may tax the adverse
PETITIONS AND MOTIONS AFTER ORIGINAL REGISTRATION Court held that where the court accepted evidence and ruled upon the claimant double or treble costs in its discretion. 7
issue of whether or not the owners duplicate cer-tificate was lost,
Lost duplicate certificate. there is no reason why the same court cannot now pass upon the
same issue, considering that the title itself allegedly lost was An adverse claim may likewise be cancelled without need of
In case of loss or theft of an owners duplicate certificate of produced to indicate the contrary.4 an order from the court. Under the provision of Section 70 of
title, due notice under oath is required to be sent by the owner or Presidential Decree No. 1529, an adverse claim shall be effective
by someone in his behalf to the Register of Deeds concerned as Surrender of mortgagees duplicate certificate when not es- only for a period of thirty days from the date of its registration.
soon as the loss or theft is discovered. So also in case such sential. After the lapse of said period, the annotation of adverse claim
certificate lost or destroyed cannot be produced by a person may be cancelled by the Register of Deeds upon a verified
applying for the entry of a new certificate to him for the registration There is nothing irregular or improper for the Register of Deeds petition therefor filed by the party in interest. After its
of any instrument, a sworn statement of the fact of such loss or to cancel a mortgage without the mortgagees duplicate certificate cancellation, no second adverse claim based on the same ground
destruction may be filed by the registered owner or other person in having been surrendered, when it appears that the mortgagee has may be registered by the same claimant.
interest and registered in the Registry of Deeds. executed a cancellation of mortgage and the document is filed for
registration. The Register of Deeds is fully justified in assuming as he An adverse claim, in order that it may be entitled to
Meanwhile, upon petition by the registered owner or other did that as said mortgagee had no further interests in the real registra-tion pursuant to Section 110 of the Land Registration Act
person in interest, the court may, after notice and hearing, direct property described in said certificate of title by reason of the payment (now Sec. 70 of P.D. No. 1529) must exist subsequent and not
the issuance of a new duplicate certificate which shall contain a of the obligation secured thereby.5 The issuance of mortgagees title is prior to the date of original registration, otherwise it cannot be
memorandum of the fact that it is issued in place of the lost now discontinued by Presidential Decree No. 1529. entered or registered upon the certificate of title issued to the
duplicate certificate, but shall in all respects be entitled to like faith land supposedly affected thereby.8 While the court is vested with
and credit as the original duplicate, and shall thereafter be Instances where presentation of owners duplicate certificate authority to direct registra-tion of an adverse claim and to
regarded as such for purposes of the law.1 is not necessary. compel the holder of a certificate of title to produce it for the
annotation necessary, where such adverse claim should have
The notice required by law for the purpose of a petition It was not necessary for the sheriff to present the owners du- been adjudged invalid, the registered owner may ask the
seeking the issuance of a new owners duplicate certificate of title is plicate of the certificate of title when he filed notice of the attachment cancellation of such annotation upon his title and, as a further
deemed sufficient if copy of such petition with the notice of hearing with the Register of Deeds, nor was it necessary for the Philippine remedy, may also ask that the adverse claimant be taxed double
has been served to the Register of Deeds and to those persons who National Bank to present the owners duplicate when the Bank filed its or treble cost, if the adverse claim was frivolous or vexatious. 9
are known to have, or who appear to have, an interest in the certificate of sale for registration.6
property as shown in the memoranda of encumbrances upon the An adverse claim is sufficient for purposes of registration if
certificate of title on file in the Registry. From the legal standpoint, By the same token, in the registration of a notice of lis pendens it meets the following requisites: (1) that it is adverse to the
there are no other interested parties who should be notified. 2 as well as any other involuntary dealings in registered land, the own- registered owner; (2) that it arises after original registration; and
ers duplicate certificate of title may not be presented by the party (3) that it cannot be registered under any other provisions of the
It is to be borne in mind, in this connection, that the complex soliciting registration. Land Regis-tration Act. In addition, the statement shall contain a
crime of estafa thru falsification of public document may be com- reference to the volume and page of the certificate of title of the
mitted where the petitioner makes a false statement in his petition Adverse claim in registered land. registered owner and a description of the land in which a right or
filed in court to secure another copy of his Torrens title upon the interest is claimed. Thus, an affidavit by means of which the
ground that the title was lost, when in fact it is in the possession of Whoever claims any right or interest in registered land adverse registration of an adverse claim is sought, which does not contain
the mortgagee of the property and, once in possession of the to the registered owner, arising subsequent to the date of the original a description of the land in which a right or interest is claimed, or
second title, sells the property by misrepresentation that he is the registration, may, if no other provision is made in the Land Registra- an inchoate right to a money claim pending before, or subject to
lawful and registered owner thereof free from any lien and tion Act for registering the same, make a statement in writing set-ting a favorable verdict from, a court of Justice, is not registrable as
encumbrance of whatever kind.3 forth fully his alleged right or interest, and how or under whom an adverse claim. And it is incumbent upon the Register of Deeds
acquired, and a reference to the volume and page of the certificate of to determine the sufficiency of the adverse claim in accordance
In another anomalous case, A filed a petition in court alleging title of the registered owner, and a description of the land in which the with the above legal requirements.
that the owners duplicate certificate of title was burned or right or interest is claimed. The statement shall be signed and sworn
otherwise lost, and asked for the issuance of a new owners to, and shall state the adverse claimants residence, and designate a Failure of the appellants to state in their affidavit of adverse
duplicate. Once the petition was granted and a new owners place at which all notices may be served upon him. This statement claim, how and under whom their alleged right or interest is
duplicate certificate issued, A sold the property to a third person. shall be entitled to registration as an adverse claim, and the court, acquired, renders the adverse claim, non-registrable and
Three months later, the true owner B filed a petition in the same upon a petition of any party in interest, shall grant a speedy hear-ing ineffective. In a case where the adverse claim filed for
registration proceeding alleging that the owners duplicate upon the question of the validity of such adverse claim and shall enter registration did not fully comply with the formal requisites of
certificate had never been lost and the same was even produced in such decree therein as justice and equity may require. If the claim is Section 110 of Act 496 as amended by Sec. 70 of PD 1529, such
court. To the latters petition, A filed an opposition alleging, among adjudged to be invalid, the registration shall be cancelled. If in any adverse claim could not be registered.11
other things, that the court sitting as a land court had no case the court after notice and hearing finds that a claim thus
75
Under the law the annotation of an adverse claim to be claim as an adverse claim acts without any authority in law and interest or right which is being secured by the adverse claim. To
effective must be made on the original of the certificate of title, commits a grave abuse of discretion amounting to lack of jurisdiction hold that the subsequent institution of an ordinary civil action
which is the one in the custody of the Register of Deeds. It need that calls for the issu-ance of the corrective writ of certiorari. Section would work to divest the adverse claim of its validity, would not
not be recorded immediately in the owners duplicate title over 110 of Act 496 (now Sec. 70 of P.D. No. 1529) provides that a person only be unrea-sonable but also oppressive inasmuch as a notice
which the Register of Deeds has no access.12 or entity who wishes to register an adverse claim with registered land of lis pendens may be cancelled even before the action is finally
must claim a part or interest in the registered land adverse to the terminated for causes which may not be attributable to the
Contracts of lease in some instances may be made the basis registered owner. Thus, purely money claims arising from unsecured claimant. And it would similarly be beyond reason to confine a
of an adverse claim. But an adverse claim of ownership based upon personal loans granted by the creditor on promissory notes executed claimant to the remedy afforded by Section 70 of P.D. No. 1529 if
prescription and adverse possession cannot be registered inasmuch in his favor by the borrowers and cosigned by the registered owner or there are other recourses in law which such claimant may avail
as under Section 47 of P.D. No. 1529 no title in derogation to that co-makers are not registrable as adverse claims against the co- of. But if any of the registrations should be considered
of the registered owner may be acquired by prescription or adverse makers registered lands. The claim asserted must affect the title or unnecessary or superfluous, it would be the notice of lis pendens
pos-session. Hence, the registration of such an adverse claim will be adverse to the title of the registered owner in order to be duly and not the annotation of the adverse claim which is more
serve no useful purpose and cannot validly and legally affect the annotated as an ad-verse claim to the land against the registered permanent and cannot be cancelled without adequate hearing
land in question.13 Neither may adverse claim be invoked in the owner. and proper disposition of the claim. 20 However the annotation of
case of a perfected contract of sale for here the Land Registration adverse claim is now ineffective after the lapse of 30 days in
Act specifi-cally prescribes the procedure for the registration of the Nature and purpose of adverse claim. pursuant to Sec. 70 of PD No. 1529.
vendees right upon a registered property. The remedy provided in
Section 70 of the same Decree would be ineffective as this can be The claim asserted must affect the title or be adverse to the title Interest of presumptive heir, not an adverse claim.
made available only if no other provision is made in the Act for of the registered owner in order to be duly annotated as an adverse
registration of such right.14 Petition for cancellation of an adverse claim to the land against the registered owner. The annotation of an The children of a living parent have no such right or
claim may be granted by the court not as an ordinary court of first adverse claim is a measure designed to protect the interest of a interest, which could be the subject of an adverse claim. All that
instance but as a land court with limited jurisdiction; and in the person over a piece of real property where the registration of such they have is an expectancy, contingent, inchoate, and dependent
exercise of its limited jurisdiction, the court cannot pass upon the interest or right is not otherwise provided for by the Land Registration entirely upon the death of the parent. Before his death nothing is
validity of the original registration proceedings inasmuch as the Act, and serves as a notice and warning to third parties dealing with or can be acquired by hereditary title. Thus, it was held that the
same is assumed.15 said property that someone is claiming an interest on the same or a interest of a presumptive heir if his expectation to inherit can
better right than the registered owner.19 be considered an interest at all is certainly not adverse within
Contract to sell may be registered by annotation on the corre- the meaning of Section 70 of P.D.
sponding certificate of title but for that purpose Section 65 of Act Adverse claim and lis pendens, when concurrently invoked.
496 requires that the owners duplicate certificate of title be No. 1529. It is successory in character, and comes into being
presented with the instrument. However, where it appears that A question was raised as to whether the institution of an action upon the demise of the parent. Meanwhile, the latter vis-a-vis
such contract to sell cannot be registered because the seller refuses and the corresponding annotation of a notice of lis pendens at the the heirs, has absolute freedom of disposal, subject only to
to surrender his duplicate title for the annotation of such voluntary back of a certificate of title invalidates a prior notation of an adverse future contingency, namely, that in the post-mortem liquidation
document, the vendee may file and register with the Register of claim appearing on the same title, where the aforementioned action of his estate it shall appear that he has not given by way of
Deeds for the protec-tion of his rights a sworn statement setting and the adverse claim refer to the same right or interest sought to be donation more than what he could have given by will.
forth his adverse claim on the property under Section 110 of Act recovered. In other words, would the annotation of a notice of lis
496, as amended by Section 70 of P.D. 1529. In that case, the pendens invalidate an adverse claim previously annotated in the same Petition seeking surrender of duplicate titles.
mere annotation of the instrument upon the Entry Book is sufficient title where both notices refer to and are designed to protect the same
to affect the real estate to which it relates, leaving to the Register interest, or would a notice of lis pendens be unnecessary and super- In every case where the Register of Deeds is requested to
of Deeds the duty to require the owner to produce the owners fluous where an adverse claim has previously been annotated? The enter a new certificate in pursuance of an instrument purporting
duplicate certificate of title.16 question was answered in the negative, holding that the two remedies to be executed by the registered owner, or by reason of any
are not contradictory or repugnant to one another; nor the existence instrument or proceedings which divest the title of the registered
Purely personal claims such as commission from the sale of of one automatically nullifies the other. For while both registrations owner against his consent, if the outstanding owners duplicate
land, fees for legal services rendered, expenses advanced, or have their own characteristics and requisites, it cannot be denied that certificate is not presented for cancellation when such request is
money loaned cannot be annotated on a certificate of title as they are both intended to protect the interest of a claimant by posing made, the Regis-trar shall not enter a new certificate, but the
adverse claims. And where the court shall have ordered the as notices and caution to those dealing with the property that same is person claiming to be entitled thereto may apply by petition to
cancellation of the registration of such claims, it has no power to subject to a claim. But while a notice of lis pendens remains during the court. The court, after hearing, may order the registered
order their payment by the party in whose name the certificate of the pendency of the action, although it may be cancelled under owner or any person withholding the duplicate to surrender the
title was issued.17 certain circumstances, the same is not true in a registered adverse same, and direct the entry of a new certificate upon such
claim, for it may be cancelled only in one instance, i.e., after the surrender.
Thus, a mere money claim may not be registered as an claim is adjudged invalid or unmeritorious by the Court, acting either
adverse claim on a Torrens certificate of title and a judge who as a land registration court or one of general jurisdiction while passing If in any case the person withholding the duplicate
orders the an-notation on the certificate of title of such money upon a case before it where the subject of the litigation is the same certificate is not amenable to the process of the court, or if for
76
any reason the outstanding owners duplicate certificate cannot be tion, instead of by ordinary action, to cancel the liens or
delivered up, the court may by decree annul the same, and order a The rule that a Regional Trial Court sitting as a land registra-tion dispensing with the requirements of due process. 29 With all due
new certificate of title to be entered. Such new certificate and all court has limited jurisdiction and has no authority to resolve respect to the foregoing opinion of the Supreme Court, we
duplicate thereof shall contain a memorandum of the annulment of controversial issues, which should be litigated in a court of general cannot reconcile our mind with this ruling in the light of the
the outstanding duplicate. jurisdiction, no longer holds. Under Sec. 2 of PD 1529, regional trial express provision of Section 112 of Act 496 as well as Section
courts acting as land registration courts now have exclusive juris- 108 of P.D. No. 1529, which allows this summary procedure
If in any case an outstanding mortgagees or lessees duplicate diction not only over applications for original registration of title to where such registered interests of any descrip-tion, whether
certificate is not produced and surrendered when the mortgage is lands, including improvements and interests therein, but also over vested, contingent, expectant or inchoate appearing upon the
dis-charged or extinguished or the lease is terminated, like petitions filed after original registration of title, with power to hear certificate, have terminated and ceased, as precisely the
proceedings may be had to obtain registration as in the case of the and determine all questions arising upon such applications or peti- situation in the instant case.
nonproduction of an owners duplicate.22 tions.26
While as above the law expressly provides the amendment
However, the petition for the surrender of the owners Amendment and alteration of certificate of title. of the civil status of a registered owner from married to
duplicate title may properly be dismissed where it involves an widower by means of a mere petition or motion filed in the
adverse claim to the land or controversial issue which takes the A certificate of title cannot be altered, amended or cancelled same registration proceeding covering the land provided no right
case out of the jurisdiction of the court sitting as a land court. Such except in a direct proceeding in accordance with law. or interest of heirs and creditors will thereby be affected, in a
issue should be threshed out in an ordinary case or in the case case where the registered owner appears on the title as
where the incident properly belong. The proceedings provided in The intervention of the court is required before any certificate of married and this was sworn to him to be a fact in a previous
the Land Registration Act being summary in nature, they are title may be amended or altered. Thus, Section 112 of Act No. 496 mortgage affecting the same property, he cannot now by similar
inadequate for the litigation of issues properly pertaining to (now Sec. 108 of P.D. No. 1529) provides that no erasure, alteration, petition or motion seek the amendment of the title by changing
ordinary civil actions, thus questions involving ownership of or title or amendment shall be made upon the registration book after the his civil status from married to single over the objection of
to a real property, or relating to the validity or cancellation or entry of a certificate of title or of a memorandum thereon and the the woman named as wife. This situation is highly controversial
discharge of a mortgage should properly be ventilated in an attestation of the same by the Register of Deeds, except by order of and the court sitting as a land court, for the purpose of receiving
ordinary proceeding.23 the court. The petition for the purpose may be filed by the registered evidence and conducting fulldress trial, will render the summary
owner or other person in interest, and entitled in the original case in proceeding envisaged in the law inadequate. Under the
Basis of Court authority for surrender of owners title. which the decree of registration was entered. The law fixes no time circumstance, instead of a mere petition or motion, the
limit for this. institution of an appropriate ordinary civil case before the court
The authority of the Court in land registration cases to order of general jurisdic-tion is necessary.30
the registered owner to surrender his duplicate certificate of title, While the remedy provided as above is summary and the
pursuant to Section 111 of the Land Registration Act (now Sec. 107 petition is required to be made under oath, the law does not require
of P.D. 1529) must be predicated upon the validity and legality of that the answer or opposition to such petition be made also under Incidentally, where the area of a registered land has been
the claim of the petitioner that he is entitled to such surrender so oath.28 dimin-ished by erosion or increased by accretion under the
that a new certificate of title may be issued to him, because the circumstances provided by law, there might be some doubt as to
registered owner had been lawfully divested of his title to the Such petition may be based on any of the following grounds: whether a certifi-cate of title may be amended or altered
registered land. Hence, in order that the Court may order the That registered interests of any description, whether vested, con- accordingly. Erosions just as much as accretions, are but natural
registered owner to sur-render his duplicate certificate of title, it tingent, expectant, or inchoate, have terminated and ceased; or that incidents to lands bordering on a running stream, and it was held
has to determine upon the evidence presented by the parties new interests have arisen or been created which do not appear upon that the provisions of the Civil Code relating thereto are not
whether the registered owner had been lawfully divested of his title the certificate; or that any error, omission, or mistake was made in affected by the Land Registration Act. So much so that it does
thereto. That, of course, requires and involves determination of the entering a certificate of title or any memorandum thereon, or on any not protect the riparian owner against diminu-tion of the area of
question of title to the registered property. As the authority granted duplicate certificate; or that the name of any person on the certificate his registered land in case of erosion, neither does it preclude
to the Court by Section 111 of the Land Registration Act does not has been changed; or that the registered owner has been married, or, such riparian owner to enjoy the benefit of accretion. As to
constitute reopening of the decree entered as a result of the if registered as married, that the marriage has been terminated; or whether such questions may be raised by motion filed under
proceedings in rem for the confirmation of imperfected titles under that a corporation which owned registered land and has been Section 112 of the Land Registration Act, as incidental matters
the said Act, it cannot be deemed to contra-vene the purpose and dissolved has not conveyed the same within three years after its dis- arising after original registration, it was likewise held that they
aim of the Torrens system.24 solution; or upon any other reasonable grounds. can properly be brought before the court under the provisions of
Section 112, although they might also be ventilated in a separate
But where upon being required to surrender the duplicate cer- However, in a petition filed for the cancellation of encumbrances action.31
tificate of title for the purpose of registering an alleged deed of consisting of an attachment and a mortgage annotated on certain
sale, the owner disputed the genuineness and due execution of the certificates of title, which appear to have already prescribed, it was The court, however, is not authorized to reopen the original
docu-ment sought to be registered, or attacked the validity of the held that while it may be true that due to long lapse of time the said de-cree of registration nor by its order impair the title or other
claim on the ground of prescription, the Cadastral Court lacks attachment and mortgage liens might have already prescribed, this is interest of a purchaser holding a certificate for value and in good
jurisdiction to act thereon under Section 111 of Act No. 496. 25 not a justification for resorting to a shortcut procedure by mere peti- faith, or his heirs or assigns, without his or their written consent.
77
Thus, if the amendment of a certificate of title would in truth mean entry of a new one in the name of said child, under Section 112 of Act
the revision and amendment of the decree of registration, such No. 496. The institution of a civil case or an intestate proceeding, From the provisions of Sections 38 and 112 of Act No. 496,
would be illegal if to be done after the lapse of the period which may be comparatively more expensive, is unnecessary. As a as amended, it is evident that when a decree of registration is
permitting the reopening of the decree. Whether by reason of fraud matter of fact, if all the heirs are agreeable to come into an amicable once made under the Torrens system, and the time has elapsed
or otherwise, any legal action has prescribed to review, alter or settlement of the estate and the decedent left no debts, they can do within which it may be contested, the same becomes perfect,
amend the decree of registration.32 so without going to court under Rule 74, Section 1, of the Rules of conclusive, and irrevocable,40 and may no longer be reopened.
Court. But, in the case of a petition being filed in court under Section However, Sec-tion 112 recognizes and permits the correction of
Besides, a person wrongfully occupying registered property is 112 of Act No. 496, it may be advisable that, before the hearing, the an error of closure, provided such correction does not include
not entitled to entitled himself of Section 112 of Act No. 496 petition for transfer of title be published in order to better safeguard lands not included in the original petition. 41 Otherwise the
inasmuch as the element of good faith is an over-riding factor in the rights of those who may have an interest in the land in question. 37 doctrine of the conclusiveness of legal indefeasibility of a Torrens
determining whether or not a petition filed thereunder should be title would be meaningless verbiage. Where the approval of an
allowed.33 However, when the surviving husband claims right of owner-ship amended subdivision plan would author-ize not only the inclusion
possessed in common with his deceased wife over real property of land of the public domain which some seventy free-patent
Notice to all parties essential to jurisdiction. registered exclusively in the latters name under the Torrens system, applications have been authorized to occupy but also a re-
the procedure marked out in Section 112 of Act No. 496 is not the opening of a decree of registration long closed and settled, it
The court can only act upon such a petition, assuming it to be remedy to be followed so that he may ask for the cancellation of the would seem clear that what the lower court has attempted, and
proper, after notice to all parties in interest, which may be served certificates of title in the name of his deceased wife and the issuance in fact accomplished, was not the correction of an error of
either by the petitioner or by order of the court. This notice is of new ones over one-half of the said properties in his name and the closure, but a retrial of the case and subsequent approval of an
neces-sary in order to give jurisdiction to the court over the petition other half in the name of his wifes heir. Conversely, it is not proper to entirely new decree of registration.42
so that it may order the entry of a new certificate, the entry or cancel a certificate of title issued exclusively in the name of a
cancellation of a memorandum upon a certificate, or grant any deceased husband and to issue a new certificate in the name of his Section 112 of Act No. 496 permits the correction of errors
other relief upon such terms and conditions, requiring security if heirs, under the provisions of Section 112 of Act No. 496, when the in the technical description of lands covered by a certificate of
necessary, as it may deem proper. The notice requirement is clearly surviving wife claims rights of ownership over the lands covered by title,43 pro-vided that the original decree of registration be not
inferred from the provision of the law which says that the court said certificate, which claim amounts to an opposition to the applica- thereby reopened44 and the title or other interest of a purchaser
shall have jurisdic-tion to hear and determine the petition after tion. The proper procedure would be to institute intestate proceedings holding a certificate for value and in good faith be not thereby
notice to all parties in interest.34 A person who has sold his land to of the deceased.38 impaired.45
another is not entitled to such notice, he having ceased to have any
further interest in the property involved. Liability imposed in summary settlement, a necessary After the land has been originally registered, the Court of
security. Land Registration ceases to have jurisdiction over contests
Cancellation of title and issuance of new one. arising concern-ing the location of boundary lines. In such cases
Where the heirs resort to the proceeding laid down by the Rules action in personam must have to be instituted for trial before an
Where the land registered under the Torrens system or under of Court for the summary settlement of estates of small value, any ordinary court of general jurisdiction.46
the provisions of the Cadastral Act is subdivided by the new co- adjudication in their favor will be subject to the conditions and
own-ers or co-heirs, and they file a petition in accordance with limitations provided in Rule 74, Sections 3, 4 and 5 of the Rules of Thus, when surveys under the old system are not correct
Section 112 of Act No. 496 (now Sec. 10, P.D. No. 1529) for the Court. However, if instead of resorting to such summary judicial and differ from the result obtained by the modern and more
cancellation of the old certificate of title and the issuance of new settlement under the Rules of Court, they directly file their petition in scientific way of surveying, corrections of errors contained in the
certificates cor-responding to the portions into which the land has the registration proceeding under Section 112 of Act No. 496, the old plan should be permitted by the court so long as the
been subdivided, these petitioners are entitled to the remedy court sitting as a land court may require the adoption of the same boundaries laid down in the description as enclosing the land and
invoked by them without the necessity of a previous declaration of safeguards for the protection of any creditors, heirs, and other par- indicating its limits are not changed. If they are not allowed in
heirs nor of the institution of intestate proceedings of the original ties in interest, as in summary settlement and adjudication under the the expediente of the case, no other remedy may be resorted to
registered owners thereof who have died. 35 This proceeding cannot Rules of Court. The very law under which their petition may be by which errors or imperfections in the old plan can be cured and
be likened to that where ownership is adjudicated; it is merely a presented, Section 112 of Act No. 496, supplies ample authority for to permit a decree based on such er-roneous survey to stand
summary proceeding where controversial issues cannot be litigated the requirement imposed by the court when ordering the entry of a would be absurd. The decree is not reopened and thereby
but must be threshed out in an ordinary case. 36 new certificate of title. Under the aforementioned law, the court is modified. It is the new plan that it made to conform to the
authorized to grant relief upon such terms and conditions, requiring decree, which procedure should be allowed and even encouraged
Again, where it appears that a transfer certificate of title has security if necessary, as it may deem proper, and the reservation in especially where, as court records show, many certificates of title
been erroneously issued in the name of the deceased father as favor of creditors, heirs, and other parties who might be deprived of are still based on the old and highly defective surveys. Such
owner, instead of in that of his child, and the latter petitions the lawful participation in the estate is such a necessary security.39 correction is authorized by Section 112 of Act No. 496. 47
court, with the conformity of all his co-heirs, that the name
appearing in the certificate of title be stricken out and his own The trial court, in the exercise of its general jurisdiction, is
name inserted in lieu thereof, it was held that the court may without authority to order the correction, and the proper
properly order the cancella-tion of said certificate of title and the Correction of errors in title permitted. procedure is a petition in the original registration case. 48
78
Relief available only to owner or person in interest.
Correction of errors of closure when not permitted. Alteration of title for the purpose of excluding a portion of a
street may be allowed. Thus, if a portion of a parcel of land was er- In opposing certain petition of the Register of Deeds, the
In relocation survey, the old corners used in the former survey roneously included in a certificate of title because it is part of a street opposi-tor challenged the personality of said official to file the
are being retraced with the end in view of approaching the original which belongs to the municipality, that portion may be excluded under petition under the provisions of Section 112 of Act No. 496. Held:
area and configuration as much as possible. It does not permit any Section 112 of Act 496 inasmuch as under the law any public Such objection is without merit. It cannot be denied that said
departure thereform except where it is unavoidable for the purpose highway, even if not noted on a title, is deemed excluded therefrom official is a person in interest as this phrase is used in Section
of correcting errors of closure or of computation. But where the as a legal lien or encumbrance. This is upon the principle that a 112 of Act No. 496. If, upon disccovering the anomaly involved,
decree of registration has already become final, even if the original person who obtains a title which includes by mistake a land which in the litigation, the Register of Deed in this case had kept silent
survey upon which the original decree was based is found to have cannot legally be registered does not by virtue of such inclusion about it, he would have been liable for damages as provided in
failed to follow the true boundaries of the petitioners land, become the owner of the land erroneously included therein. But this Section 102 of said Act.57 Hence, the Regis-ter of Deeds, even if
correction of such errors of closure can no longer be allowed. Under theory only holds true if there is no dispute that the portion to be he were not a registered owner nor a person with registered
the circumstances, the court is without authority to entertain, much excluded is re-ally part of the public highway. This principle only interest, may in proper cases file likewise such petition.
less grant, such peti-tion to alter the same. 49 Accordingly, it was applies if there is unanimity as to the issue of fact involved. 53
held that if a subsequent certificate of title cannot be permitted to Substantial controversy as a limitation.
prevail over a previous Tor-rens title, with more reason should a Entry of new certificate included as a relief.
resurvey plan not be allowed to alter or modify such title so as to The Regional Trial Court acting as a land court in a cadastral
make the area of the land therein described agree with that given Under Section 112 of Act No. 496, the relief that may be granted proceeding has no jurisdiction over a case between creditor and
in the plan.50 by the court is not limited to mere alteration or amendment of a cer- debtor concerning the validity of an alleged payment made by
tificate of title. An existing certificate in proper cases may be ordered the latter to the former and the question of whether or not the
Following the same trend, it was held that an alleged mistake cancelled and a new one entered in lieu thereof. And the grounds that creditor should be made to execute a deed of release, or whether
committed in the survey which served as basis of the decree of may be relied upon are also not limited to those expressly and or not the debt should be declared paid and its mortgage security
regis-tration, pursuant to which the Torrens title was issued, can no definitely enumerated in the law; for it is so stated therein that the cancelled, which is a purely personal action between them,
longer be questioned or corrected after one year from its entry, the relief may be available likewise upon any other reasonable ground, should be ventilated in an ordinary civil action. The special and
same having become conclusive and incontrovertible under the which leaves the door open to such deserving cases as may be deter- limited character of the jurisdiction of such land court is apparent
law.51 mined by the court. from the provisions of Section 2 of Act No. 496, as amended, as
well as those of the Cadastral Act (No. 2259). The proceedings
What alteration authorized. Thus, it was held that the aforementioned legal precept is ap- under both Acts are in rem against the land and the buildings
plicable where the cancellation of the original certificate of title and and improvements thereon, and the decrees entered operate
In a petition for an alteration of a certificate of title, consisting the issuance of a new certificate in its stead in the name of persons directly on the land and such buildings and improvements. 58
in the substitution of the name of a registered owner for that of an- declared to be the owners by final judgment in a separate proceed- Under both laws, the whole world is made a party to the
other, it was held that in consonance with the universally ing are being sought, for such case falls under the terms upon any proceedings.
recognized principles which underlie Act No. 496, the court may other reasonable ground provided in the law.54 Incidentally the Land
not, even if it is convinced that clerical mistake was made, recall a Registration Court can even entertain and dispose of, at least for the However, it was held that where a petition concerning the
certificate of title after the lapse of more than one year from the sake of expediency, the question of the validity or invalidity of an can-cellation of any encumbrance noted on a Torrens certificate
date of the entry of the final decree, against the vigorous objection instrument of sale, upon which a petition for the cancellation of a of title is filed within the record of the land registration case in
of its holder. On such a certificate of title what may be authorized transfer certificate of title is based.55 which the basic decree was entered and there is no substantial
are: (1) only alterations which to not impair rights recorded in the controversy in regard thereto between the petitioner and any
decree; or (2) alterations which if they do prejudice such rights, are Where a sale conveying registered land was executed, but not other interested party, such petition may be considered as a
consented to by all the parties concerned; or (3) alterations to notarized before a notary public to make it a public document, and mere incidental matter in such land registration and may therein
correct obvious mistakes. By the very fact of the indefeasibility of meanwhile the vendor should die or his whereabouts become un- be acted upon by the proper court.59 So, also where a certificate
the decree of registration, the court after one year loses its known, the problem that may arise is how the private instrument of title bears an annotation of an attachment lien which should
competence to review or modify in a substantial manner a decree evidencing the sale could be admitted to registration by the Register not be maintained because it has lost its legal value and its
against the opposition of any of the parties adversely affected. of Deeds. Under the circumstances, an appropriate motion may be annotation would work to the prejudice of the registered owner
filed with the Court under Section 112 of Act No. 496, and once the of the property, the court may summarily order the cancellation
genuineness and due execution of the sale in private instrument could of the lien under Section 112 of the Land Registration Act. 60
Section 112 of Act No. 496 gives notice that it shall not be be established and especially the fact that the price stipulated was
construed to give the court authority to open the original decree of paid and the possession of the property delivered to the purchaser, On the other hand, the petition of the mortgagor for the
registration, and Section 38, which sanctions the opening of a the Court will thereby have jurisdiction to order the cancellation of the cancel-lation of a second mortgage was held equivalent to
decree within one year from the date of its entry, for actual fraud, vendors certificate of title and the issuance of a new one in lieu questioning the validity of said second mortgage, which could
provides that after that period every decree or certificate of title thereof in the name of the purchaser.56 only be done in an ordi-nary civil action, and not under Section
issued in accordance with this section shall be incontrovertible. 52 112 of the Land Registration Act. So, also the validity of
79
payment, like the question of validity of cancellation or discharge of In another case where the registered owner had sold the land to certificate of title to be issued in the name of the heirs, in lieu of
a mortgage, properly pertains to an or-dinary civil action and another without having registered the sale but only delivered the the certificate in the name of the decedent, should bear an
should not fall within the limited jurisdiction of a Court of First Torrens title to the buyer, and thereafter in a civil case against the annotation of a lien or encumbrance in favor of creditors, heirs,
Instance acting as a Court of Land Registration. 61 But where a seller the same property was attached and subsequently sold at public and other persons who might be deprived of their lawful
mortgage on titled property was put up as a counter-guaranty to a auction, now that the purchaser at public auction is seeking in a participation in the estate, this legal reservation to last for two
surety bond and subsequently the said bond ceased to be motion filed with the cadastral court in the same registration years from and after the settlement or distribution of the
demandable, it was held that the order of the lower court cancelling proceeding the surrender of the Torrens title to the Register of Deeds estate.70
the memorandum of the mortgage on the owners title is correct.62 for cancellation and issuance of a new title, to which the previous
buyer filed an opposition on the ground that he owned the land by If the property comprising the estate thus distributed
Jurisdiction in controversial cases. virtue of an earlier sale and was in possession thereof, it was held happens to be other than real property, the filing of a bond in an
that the cadastral court had no jurisdiction over the subject matter of amount equivalent to the value of the personal property involved
In a case involving cancellation of a writ of execution the motion and the issue raised in the opposition. 67 Here is another is required. But, when only real property is involved, no bond is
annotated on a certificate of title on the ground of prescription, concrete instance where the opposition was considered serious necessary for the two-year lien or encumbrance noted on the
where the party in whose favor the execution was issued opposes enough as to develop a substantial controversy and deprive the certificate of title is considered sufficient for any claim which may
the petition to that effect, it was held that it was not proper to cadastral court of jurisdiction, indicating that it is only the court of be filed within the statutory period.
grant the cancellation of the annotation as prayed for under the general jurisdiction that can take cognizance of, and pass upon, such
provisions of Section 112 of Act No. 496, because the issue raised therein. As to whether a bond may be fixed and allowed to
determination of such controversy should not be made in the same substitute for such lien on real property, our Supreme Court held
registration proceeding for lack of jurisdic-tion. While Section 112 The Court of First Instance, when acting as a cadastral court or a that according to Section 112 of Act No. 496, the court may
above cited authorizes a person in interest, among other things, to court of land registration, has limited authority. Once its deci-sion has order the cancellation of memoranda upon a certificate, when
ask the court in registration proceeding for any alteration or become final, such court cannot even determine a motion supported registered interests of any description, whether vested,
amendment of a certificate of title upon the ground that registered by an instrument filed before the issuance of the decree, whether contingent, expectant, or inchoate, have terminated and ceased.
interests of any description, whether vested, con-tingent, expectant such instrument reflects or not the true agreement between the But, neither Section 4 of Rule 74 nor Section 112 of Act No. 496
or inchoate, have terminated and ceased, such relief can only be parties, or whether the execution thereof is tainted with fraud. Much authorizes the substitution of a bond for a lien or registered
granted if there is unanimity among the parties, or that there is no less may it render judgment for the payment of a sum of money on interest of any description, whether vested, expectant, inchoate,
adverse claim or serious objection on the part of any party in account of the use and occupation of the land. These matters are or contingent, which has not yet terminated or ceased. 71
interest; otherwise, the case becomes controversial and should be proper subject of an ordinary action and are beyond the province of a
threshed out in an ordinary case or in the case where the incident land registration or cadastral case.68 Neither may a mortgage which was registered and
properly belongs63 Accordingly, an annotation of an adverse claim annotated on the back of a certificate of title be ordered
may be ordered cancelled only where the issue involved is not Lately, however, in subsequent cases, the above rule has been cancelled upon the filing of a surety bond. To order the
controversial or so disputed as to warrant that it be litigated in an relaxed by admitting exceptions, based not only on the fact that the substitution of the mortgage for a surety bond would in effect
ordinary action.64 Land Registration Courts are likewise the same Courts of First In- novate the contract entered into between the par-ties, which
stance but also on the following premises: (1) Mutual consent of the cannot be done without their consent. Such cancellation,
By unanimity among the parties, it is meant not a mere parties or their acquiescence in submitting the issues for determina- therefore, cannot be ordered even by a court of a general
mat-ter of procedure. Such unanimity does not exist simply tion by the court in the registration proceedings; (2) Full opportunity jurisdiction, much less by a court of limited and special
because the parties have entered into trial and presented their given to the parties in the presentation of their respective sides of the jurisdiction.72
evidence. Neither is it lacking merely because of the presence of issues and of the evidence in support thereof; and (3) Considera-tion
any opposition for otherwise it would be sufficient for an interested by the court that the evidence already of record is sufficient and Existence of buildings and improvements how noted on
party to interpose even a baseless protest or adverse claim. Rather, adequate for rendering a decision upon the issues. Explaining the certificate of title.
the unanimity con-templated refers to the subject matter over exception to the rule, the Supreme Court maintained that the real
which the jurisdiction of a court cannot be waived by agreement of question is not a matter of jurisdiction but essentially only a proce- The registration of buildings and improvements by means of
the parties. Such jurisdiction is determined by law and cannot be dural matter or mode of practice which can be waived.69 annotation on the certificate of title is not absolutely necessary,
acquired by the court by consent or submission of the parties. And so long as such buildings and improvements belong to the same
as to the opposition, it should be serious enough between the Bond not allowed to substitute for lien. owner of the registered land, in view of the legal presumption
parties as to controvert the title of the one seeking relief under that to the owner of a registered land also belong all buildings
Section 112 of Act No. 496.65 Thus, where the issue involved in a Under Rule 74, Section 1, of the Rules of Court, if the decedent and improvements existing thereon, unless a reservation to the
petition for the cancellation of the annotation of a deed of tax sale left no debts and the heirs to succeed are of legal age, or the minors contrary shall have been noted on his certificate of title. However,
on a certificate of title is not one of ownership but entirely of are represented by their judicial or legal representatives, the par-ties by common practice of banks and other credit institutions, it is
priority of the sales made covering the same property, said petition may partition the estate among themselves extrajudicially. So, also, often required that the ownership of the buildings and
can be acted upon by the court in its capacity as land registration where the estate does not exceed ten thousand pesos in value, the improvements, specially new constructions, on registered land be
court. interested parties may settle said estate summarily in court under noted on the corresponding certificate of title. This can be
Section 2 of the same Rule. In both cases, however, the new accomplished by filing a petition in court in the same regis-
80
tration proceeding under Section 112 of Act No. 496, on the ground owner-ship, a special procedure has been provided by Republic Act order is null and void and of no effect, and naturally anything
that certain new interests have arisen which do not appear upon No. 26, approved September 25, 1946. done under said order is likewise null and void. Publication in a
the certificate of title. newspaper of general circulation like the Manila Daily Bulletin, in
The purpose of the reconstitution of any document, book or lieu of the Official Gazette, cannot be considered in itself
Thus, in a case where the buildings which were the subject of record is to have the same reproduced, after observing the proce- sufficient compliance.80 An error on the part of the court may
controversy were placed on the land after the issuance of the dure prescribed by law, in the same form they existed when the loss result in the prejudice of the real owner of the land covered by
decree of registration, it was held that this circumstance would or destruction occurred.77 When certificates of title have been so the reconstituted certificate of title, and damage may be
make a pro-ceeding under Section 112 of Act No. 496 all the more reconstituted, they shall have the same validity and legal effect as the recovered from the Assurance Fund.81
necessary in order to protect the new interests created. 73 Now, originals thereof. And Republic Act No. 26 enumerates under Sections
where such build-ing does not belong to the owner of the land on 2 and 3 thereof the sources from which an original copy of an But where the court, after due publication and hearing,
which it stands, and it was not so registered jointly with the land, original certificate of title or transfer certificate of title, as such finds that the evidence presented is sufficient and proper to
there can be no legal compulsion to register in the Registry of titles are denominated under the Land Registration Act, may be warrant the reconstitution of the lost certificate of title and that
Deeds any transaction over such building in order to produce notice reconstituted. the petitioner is the registered owner of the property, and said
to third persons.74 certificate was in force at the time it was lost, the duty of the
The reconstitution of original copies of lost or destroyed certifi- court is to issue the order of reconstitution. This duty is
But, suppose the building already existed when the certificate cates of title for a time could be done administratively, or without mandatory, and the law does not give the court discretion to
of title covering the land was issued, and it is silent about the build- proceeding in court, under the provision of Republic Act 26. However, deny the reconstitution if all the basic require-ments have been
ing. While the term land necessarily includes the building thereon due to numerous anomalies resulting therefrom, this procedure has complied with.82 And this rule is not altered by the mere fact that
although not mentioned, still the certificate may be made to show been abrogated by Section 110 of Presidential Decree No. 1529. the petitioner seeking the reconstitution happens to be an alien
expressly the fact of its existence. Section 112 of Act No. 496 pro- who purchased the land involved after the adoption of the
vides that the registered owner may, at any time, apply by petition However, under Republic Act 673, administrative reconstitution Constitution.83
to have corrected any error omission, or mistake made in entering of lost or destroyed original copies of certificates of title prescribed in
a certificate, or any memorandum thereon, or any duplicate Republic Act 26 may be availed of only in case of substantial loss or Reconstitution does not confirm nor adjudicate ownership of
certificate. Under said provision, the original certificate may be destruction of land titles due to fire, flood or other force majeure a property.84
amended so as to include not only the land described in the original where the number of certificates of title lost or damaged is at least
petition, but the buildings located thereon as well, which had also ten per cent (10%) of the total number of title in the custody of the Nature of reconstitution.
been included in the original petition.75 Register of Deeds but in no case shall the number of certificate of title
lost or damage be less than five hundred (500) as determined by the In Lee vs. Republic, G.R. No. 128195, Oct. 3, 2001, it was
Service of notice after registration. Administrator of the Land Registration Authority.78 said that the reconstitution of a certificate of title denotes
restoration in the original form and condition of a lost or
All notices required by or given in pursuance of the provisions Now then, in the administrative reconstitution of a certificate of destroyed instrument attesting the title of a person to a piece of
of the Land Registration Act by the Clerk of Court or any Register of title supported by the owners duplicate copy of the title, no other land. The purpose of the reconstitution of title is to have, after
Deeds, after original registration, shall be sent by mail to the requisite was required under Section 6 of Republic Act No. 26 unlike observing the procedures pre-scribed by law, the title reproduced
person to be notified, at his residence and post office address as in judicial reconstitution under Section 12 of the same law. in exactly the same way it has been when the loss or destruction
stated in the certificate of title or in any registered instrument occurred.
under which he claims an interest, in the Office of the Clerk or The reconstitution may now only be done judicially by filing a
Register of Deeds, relating to the parcel of land in question. petition for the purpose with the proper regional trial court, in which In this case, petitioners sought a reconstitution of title in
case the reconstituted title will be free from any reservation. 79 The the name of Lee Liong, alleging that the transfer certificate of
All notices and citations directed by special order of the court law, however, requires as a prerequisite that a notice of the petition title issued to him was lost or destroyed during World War II. All
under the provisions of the Land Registration Act, after original be published, at the expense of the petitioner, twice in successive the documents recorded and issued by the Register of Deeds,
registration, may be served in the manner above stated, and the issues of the Official Gazette, and to be posted on the main entrance Capiz, which include the transfer certificate of title issued in the
cer-tificate of the clerk shall be conclusive proof of such service. of the provincial building and of the municipal building of the mu- name of Lee Liong, were all destroyed during the war. The fact
Provided, however, that the court may in any case order different or nicipality or city in which the land lies, at least thirty days prior to the that the original of the transfer certificate of title was not in the
further service, by publication or otherwise, and shall in all cases do date of hearing. At the hearing, the court determines the petition and files of the Office of the Register of Deeds did not imply that a
so when the interests of justice require such action. renders such judgment as justice and equity may require. transfer certificate of title had not been issued. In the trial court
proceedings, petitioners presented evidence proving the sale of
Reconstitution of original certificate of title. A reconstitution proceeding is an in rem proceedings. When an the land from the Dinglasangs to Lee Liong and the latters
order in such a proceeding has become final, the findings of the court subsequent possession of the property in the concept of owner.
As a consequence of war, many books and records of the therein can no longer be opened for review. However, if it can be Thus, the trial court, after examining all the evidence before it,
differ-ent offices of Registers of Deeds all over the Philippines were shown that the order of reconstitution was issued by the court without ordered the reconstitution of title in the name of Liong Lee.
lost or destroyed, and among them were the originals of Torrens previous publication in the Official Gazette as required by Section 13
titles. To facilitate the reconstitution of such important evidences of of Republic Act No. 26, which is mandatory and jurisdictional, such
81
However, the original certificate of title must be based on an of reservation was made thereon as directed by law, although it may prejudice to the right of the parties, after the reconstitution of
owners duplicate, secondary evidence thereof, or other valid fail to carry over a subsisting mortgage previously annotated on the the title in the name of the same owner contained therein at the
sources of the title to be reconstituted. In this case, reconstitution original title that was lost, any subsequent mortgage that may be time of the loss or destruction thereof, to present and register
was based on the plan and technical description approved by the constituted on the same property must yield to a prior one although the deeds of conveyance, pursuant to which the Register of
Land Registra-tion Authority. This renders the order of this may actually be brought to light later. Deeds becomes duty bound to enter and issue new certificates
reconstitution void for lack of factual support. A judgment with and duplicate certificates of title to the transferees. For the
absolutely nothing to support it is void. Thus, the fact that the mortgage executed in favor of S, is prior purpose of the issuance of the new certificate of title, the party in
in point of time, and in point of registration to that executed in favor interest need not come to court. 88
As earlier mentioned, a reconstitution of title is the re- of the Bank, let alone the fact that when the latter mortgage was
issuance of a new certificate of title lost or destroyed in its original executed the Bank must have known, as it was its duty to find out, Where the certificate of title considered lost or destroyed
form and condition. It does not pass upon the ownership of the that there was a warning appearing in the reconstituted titles that the has been reconstituted, but when recovered later it was found to
land covered by the lost or destroyed title. Any change in the same were subject to whatever encumbrance as may exist which for be not in the name of the same person in whose favor the
ownership of the prop-erty must be the subject of a separate suit. one reason or another does not appear in said titles, with such reconstituted certificate was issued, the proper recourse is to
Thus, although petitioners are in possession of the land, a separate warning the Bank should have taken the necessary precaution to avail of Section 19 of Republic Act 26, which provides for the
proceeding is necessary to thresh out the issue of ownership of the inquire into the existence of any hidden transaction or encumbrance procedure to cancel the reconstituted certificate of title. As to
land. that might affect the property that was being offered in security such which of the two titles, the reconstituted one or the original,
as the one existing in favor of S, and when the bank accepted as se- should prevail, the resolution thereof is left to the land court. 89
Even if the reconstitution order was invalid, can petitioners curity the titles offered by the plaintiff without any further inquiry, it
still acquire the subject land from their alien predecessor-in- assumed the risk and the consequences resulting therefrom, and Thus, where a certificate of title covering a parcel of land
interest? entitles S to priority on the mortgage claim over that of the Bank. 85 was reconstituted judicially, and it was found later that there
existed earlier a certificate of title covering the same property in
Yes, in a separate proceeding, the Supreme Court said, in Lack of essential data fatal. the name of another person, it was held that the existence of
sales of real estate to aliens incapable of holding title thereto by such prior title ipso facto nullified the reconstitution proceedings
virtue of the provisions of the Constitution both the vendor and the Where a petition for reconstitution of title lacks the essential and signified that the evidence in said proceedings as to the
vendee are deemed to have committed the constitutional violation data required by Secs. 12 and 13 of Republic Act No. 26, such as the alleged ownership under the reconstituted title cannot be given
and being thus in pari delicto the courts will not afford protection to nature and description of the buildings or improvements which do not any credence. That kind of reconstitution was a brazen and
either party. The ownership of the land does not revert to the belong to the owner of the land, and the names and addresses of the monstrous fraud foisted on the courts of justice. 90
original sellers. The proper party to assail the sale is the Solicitor owners of such buildings and improvements, and the names and
General. This was what was done in this case when the Solicitor addresses of the occupants or persons in possession thereof, of the No need for notice to actual possessor of lot in
General initiated an action for annulment of judgment of owners of the adjoining property, and of all persons who may have reconstitution.
reconstitution of title. While it took the Republic more than sixty any interest in the property; and neither do there data appear in the
years to assert itself, it is not barred from initiating such action. notice of hearing, such that no adjoining owner, occupant or The possessor of the lot, the title of which is under
Prescription never lies against the State. possessor was ever served copy of the notice by registered mail or reconstitu-tion is not entitled to notice of the petition for
otherwise, it was held that said defects have not invested the Court reconstitution. In Jesus San Agustin vs. CA, et al., G.R. No.
However, in this case, subsequent circumstances militate with authority or jurisdiction to proceed with the case because the 121940, Dec. 4, 2001, it was said that such possessor is not
against escheat proceedings because the land is now in the hands manner or mode of obtaining jurisdiction as prescribed by the statute entitled to notice based under P.D. 1529 which provides:
of Filipinos. The original vendee, Lee Liong, has since died and the which is manda-tory has not been strictly followed, thereby rendering
land has been inherited by his heirs and subsequently their heirs, all proceedings therein utterly pull and void. 86
petitioners who are Filipino citizens. Section 109. Notice and replacement of lost duplicate
Reconstitution of title does not permit placing it in altered certificate In case of loss or theft or an owners duplicate
If land is invalidly transferred to an alien who subsequently form. certificate of title, due notice under oath shall be sent by
becomes a citizen or transfers it to a citizen, the flaw in the original the owner or by someone in his behalf to the Register of
transaction is considered cured and title of the transferee is Reconstitution of a certificate of title literally and within the Deeds of the province or city where the land lies as soon as
rendered valid. Thus, the subsequent transfer of the property to meaning of Republic Act No. 26 denotes restoration of the instrument the loss or theft is discovered. If a duplicate certificate is
qualified Fili-pinos may no longer be impugned on the basis of the which is supposed to have been lost or destroyed in its original form lost or destroyed, or cannot be produced by a person
invalidity of the initial transfer. The objective of the constitutional and condition. It is limited to the reconstitution of the certificate as it applying for the entry of a new certificate to him or for the
provision to keep our lands in Filipino hands has been achieved. stood at the time of its lost or destruction and should not be stretched registration of any instrument, a sworn statement of the
to include later changes which alter or affect the title of the registered fact of such loss or destruction may be filed by the
Reservation noted on reconstituted title. owner.87 Where the motion for reconstitution was not to restore a lost registered owner or other person in interest and registered.
registered certificate of title but to register and issue a new certificate
Where the original of a certificate of title has been reconsti- in the names of subsequent owners, in lieu of one originally registered Upon the petition of the registered owner or other person in
tuted extrajudicially under Republic Act No. 26, and an annotation in the names of other persons, said motion should be denied without interest, the court may, after notice and due hearing, direct the
82
issuance of a new duplicate certificate, which shall contain Republic Act No. 26, entitled An Act Providing A Special Procedure before the trial court is based. They also stated that the issue of
certificate, but shall in all that it is issued in place of the lost for the Reconstitution of Torrens Certificate of Title Lost or the ownership over the parcels of land and of the validity of the
duplicate certifi-cate, but shall in all respects be entitled to like faith Destroyed, while the present case is based on Section 109 of P.D. sale is irrelevant in a petition for the issuance of a new owners
and credit as the original duplicate, and shall thereafter be No. 1529. duplicate certificate of title. The respondents also threw back the
regarded as such for all purposes of this decree. charge of fraud to petitioner for the latters possession of the
Under R.A. No. 26, reconstitution is validly made only in case owners dupli-cate copies of the said certificates of title without
In Office of Court Administrator vs. Matas, A.M. No. RTJ-92- the original copy of the certificate of title with the Register of Deeds is the knowledge of respondents.
836, 247 SCRA 9, it was held: lost or destroyed. And if no notice of the date of hearing of a recon-
stitution case is served on a possessor or one having interest in the In ruling in favor of the petitioner, the Supreme Court said
In the case at bar, the respective certificate of title of property involved, he is deprived of his day in court and the order of that pursuant to Section 2 of Rule 47 of the 1997 Revised Rules
the properties in question on file with the Register of Deeds reconstitution is null and void. (Manila Railroad Co. vs. Moya, et al., of Civil
are existing, and it is the owners copy of the certificate of title 14 SCRA 358). The case at bar is not for reconstitution, but merely
that was alleged to have been lost or destroyed. Thus, it is for replacement of lost duplicate certificate. Procedure, the grounds to annul a judgment of a lower court are
Section 109 of P.D. 1529 which was approved on June 11, ex-trinsic fraud and lack of jurisdiction on the basis of the
1978, that becomes effective and is applicable, a reading of Reconstitution of titles. allegations of petitioner, the Supreme Court found the issuance
which shows that it is practically the same as Section 109 of of new owners duplicate certificate was tainted with extrinsic
Act No. 496, governing reconstitution of a duplicate certificate Trial courts should exercise extreme caution in granting peti- fraud.
of title lots or destroyed. Consequently, it is sufficient that the tions for reconstitution of land titles, lest they become unwitting
notice under Section 109 is sent to the Register of Deeds and accomplices in the reconstitution of questionable titles, instead of Extrinsic fraud contemplates a situation where a litigant
to those persons who are known to have, or appear to have, being instruments in promoting the stability of our system or land com-mits acts outside of the trial of the case, the effect of which
an interest in the property as shown in the Memorandum of registration. Strict compliance with the jurisdiction requirements of prevents a party from having a trial, a real contents, or from
encumbrances at the back of the original or transfer certificate the law in the reconstitution of a title is vital, especially when the title presenting all of his case to the court, or where it operates upon
of title on file in the Office of the Register of Deeds. From a sought to be reconstituted covers an area of more than 2,000,000 matters pertain-ing, not to the judgment itself, but to the
legal standpoint, there are no other interested parties who square meters, as in the present case. (Republic vs. Maximo Planes, manner in which it was procured so that there is not a fair
should be notified, except those above-mentioned since they G.R. No. 130433, Apr. 17, 2002). submission of the controversy. (Strait Times, Inc. vs. Court of
are the only ones who may be deemed to have a claim to the Appeals, 294 SCRA 714 citing Arce-lona vs. CA, G.R. No.
property involved. A person dealing with registered property is Annulment of decree of reconstitution on grounds of fraud and 102900, Oct. 2, 1997; Macabingkil vs. Peoples Homesite and
not charged with notice of encumbrances not annotated on lack of jurisdiction. Housing Corporation, 72 SCRA 326). The overriding consideration
the back of title. is that the fraudulent scheme of the prevailing litigant prevented
In Rexlon Realty Group, Inc. vs. CA, et al., G.R, No. 128412, a party from having his day in court. Hence, the Supreme Court
If the petitioner does not appear to have an interest in the has held that extrinsic fraud is present in cases where a party
prop-erty based on the memorandum of encumbrances annotated Mar. 15, 2002, a petition for annulment of the decree reconstituting a
at the back of the title, he is not entitled to notice. His claim that title was filed on the grounds of fraud and lack of jurisdiction. It was (1) is deprived of his interest in land, because of a deliberate
he is an heir of the original owner of the lot covered by the alleged that the titles were not lost but were delivered to a person misrep-resentation that the lots are not contested when in fact
disputed lot and the present occupant thereof is not annotated in pursuant to a contract of sale. they are; (2) applies for and obtains adjudication and registration
the said memorandum of encumbrances. Neither was his claim in the name of a co-owner of the land which he knows has not
entered on the Certificates of Title in the name of their The petitioner likewise alleged that it was denied due process in been allotted to him in the partition; (3) intentionally conceals
original/former owners on file with the Register of Deeds at the view of certain procedural lapses that attended the proceedings in the facts and connives with the land inspector, so that the latter
time of the filing or pendency of LRC Case No. R-4659. Clearly, he trial court. First, it was not served with a specific notice of hearing of would include in the survey plan the bed of a navigable stream;
is not entitled to notice. The rule is so, for as long as there was the petition; that it is entitled to said specific notice for the reason (4) deliberately makes a false statement that there are no other
compliance by petitioner of the RTCs order of publication of the that the procedure in Section 23 of P.D. No. 1529 is basically similar claims; (5) induces another not to oppose an application; (6)
petition in a newspaper of general circulation. This is sufficient to the procedure followed in Section 13 of R.A. 26. Second, the deliberately fails to notify the party entitled to notice; or (7)
notice of the petition to the public at large. procedure followed in posting the general notice was fatally flawed misrepresents the identity of the lot to the true owner, causing
because of the failure to comply with the three (3) week publication the latter to withdraw his opposition. Fraud, in these cases, goes
The fact that he is a possessor or actual occupant of the lot in requirement. These procedural infirmities, according to the peti- into and affects the jurisdiction of the court; thus, a decision
controversy does not entitle him under the law to be notified. In tioner, affected the jurisdiction of the trial court in the sense that it rendered on the basis of such fraud becomes subject to
Ala-bang Development Corporation vs. Valenzuela, 116 SCRA 261, deprived the petitioner of its statutory right to oppose the petition annulment. (Azurin vs. Quitoriano, 81 Phil. 265; Arceo vs. Varela,
it was held that in reconstitution proceedings, courts must make and to present evidence in support of its opposition. 89 Phil. 212; Republic vs. Sioson, 9 SCRA 533; Angelo vs.
sure that indispensable parties, i.e., the actual owners and Director of Lands, 49 Phil. 838; Salva vs. Salvador, 18 Phil. 193;
possessors of the lands involved, are duly served with actual and In response, the respondents stated that the petitioner is not Libudan vs. Gil, 45 SCRA 17).
person and notice of the petition. The reliance on Alabang is entitled to a specific notice inasmuch as the said notice is not required
misplaced because the cause of action in that case is based on by Section 23 of P. D. No. 1529 upon which respondents petition
83
In the case of Strait Times, Inc. vs. CA, 294 SCRA 714, where not acquire jurisdiction and the new title issued in replacement
the Supreme Court was faced with the same facts and issue, thereof are void.
respond-ent filed a petition for the issuance of a new owners
duplicate cer-tificate of title. He alleged therein that his copy was Transaction evidenced by document lost; how registered.
lost and was not pledged or otherwise delivered to any person or
entity to guarantee any obligation or for any purpose. When the Registers of Deeds, by practice and necessity, if not by express
trial court issued a new owners duplicate title, therein petitioner provision of law, are forbidden to effect registration of documents that
Strait Times, Inc. filed a petition to annul judgment based on have been lost or destroyed after their presentation and entry in the
extrinsic fraud and lack of juris-diction. Strait Times, Inc. claimed daybook, irrespective of the cause of and the blame for their loss and
that respondent misrepresented before the trial court that the said destruction. The invariable step to be taken when such even-tuality
owners duplicate copy of the title was lost when in fact it was in happens is for the interested parties either (1) to produce an
the possession of the former pursu-ant to a contract of sale authenticated copy of the lost or destroyed document, or (2) to
between respondent and a certain Conrado Callera. Callera later secure an order to the Register of Deeds from the proper court. The
sold the lot represented by the alleged lost title to therein petitioner latter is the only course open when no authenticated copy can be
Strait Times, Inc. produced and the parties especially are in disagreement as to the
terms and conditions of the missing document. Where any motion is
It was ruled that extrinsic fraud did not attend the filed with the court seeking an order, it must have to be set for
proceedings before the trial for the reason that: hearing after notice to all parties in interest, under Section 112 of Act
No. 496; without hearing and adequate notice thereof, no court order
xxx It is well-settled that the use of forged instruments can have binding effect on the adverse parties. 90
or perjured testimonies during trial is not an extrinsic fraud,
because such evidence does not preclude the participation of Another remedy that may be availed of in case the supposed
any party in the proceedings. While a perjured testimony may deed of sale has been lost or destroyed is for the purchaser to insti-
prevent a fair and just determination of a case, it does not bar tute an ordinary action to compel the seller to execute another deed,
the adverse party from rebutting or opposing the use of such in lieu of the one lost, for the conveyance of the land previously sold
evidence. Furthermore, it should be stressed that extrinsic to him. The filing of a new application for original registration of such
fraud pertains to an act committed outside of trial. The alleged land already registered under Act No. 496 is improper because the
fraud in this case was perpetrated during the trial. court has no jurisdiction to decree the registration of such land
previously decreed.91
Besides, the failure of petitioner to present its case was
caused by its own inaction. It was not impleaded as a party to the oOo
case before the trial court because it failed to effect the timely
registration of its Deed of Sale. Had it done so, it would have been
able to oppose the issuance of the new duplicate title, rebut
Espinosas testimony, and prove that it already bought the land in
issue.

However, in consonance with the Strait Times case,


respondent in act of misrepresentation, though not constituting
extrinsic fraud, is still an evidence of absence of jurisdiction. In the
Strait Times case and in Demetriou vs. CA, 238 SCRA 158, also on
facts analogous to those involved in this case, it was held that if an
owners duplicate copy of a certificate of title has not been lost but
is in fact in the pos-session of another person, the reconstituted
title is void and the court rendering the decision has not acquired
jurisdiction. Consequently, the decision may be attacked any time.
In the case at bar, the authen-ticity and genuineness of the owners
duplicate of TCT Nos. T-52537 and T-52538 in the possession of
petitioner and the Absolute Deed of Sale in its favor have not been
disputed. As there is no proof to sup-port actual loss of the said
owners duplicate copies of said certificate of title, the trial court did

84
Chapter XX Certificate as object of larceny. forged, shall be imprisoned not exceeding ten years or fined not
FEES, OFFENSES, PENALTIES, ETC. exceeding ten thousand pesos, or both, in the discretion of the
Certificates of title and duplicate certificates issued under the court.
Registration fees. Land Registration Act shall be subject of larceny.3
Prosecution for offenses for violations of any of the
The fees for services rendered in connection with original and Perjury. provisions of the Land Registration Act shall be
subsequent registration of lands, as are payable to the Clerk of instituted and conducted in the proper Regional Trial
Court, the Sheriff, and the Register of Deeds, are provided in Whoever knowingly swears falsely to any statement required to Court.8
Section 114 of Act No. 496, as amended by Republic Act No. 177 be made under oath by the Land Registration Act shall be guilty of
and later by Republic Act No. 928, and lastly by Presidential perjury and liable to the penalties provided by law for perjury.4 Fraudulent sales.
Decrees Nos. 1418 and 1529.
The legal requirement of lie claimants oath to the answers in Whoever, with intent to defraud, sells and conveys
Full payment of fees is a prerequisite to registration. Thus, registration and cadastral proceedings 5 has a definite purpose, and registered land knowing that an undischarged attachment or any
when an instrument is presented in the Office of the Register of the effects of a false statement under oath can neither be ignored nor other encum-brance exists thereon which is not noted by
Deeds, this official is not authorized to accept same even for tolerated. A prosecution for perjury is the least that could be memorandum on the duplicate certificate of the title, without
purposes of a primary entry without payment in advance of at least expected. informing the grantee of such attachment or other encumbrance
the entry fee of five pe-sos for each entry or document, the rest of before the consideration is paid, shall be punished by
the fees due for registration being payable within the next fifteen Fraudulent procurement of certificate. imprisonment not exceeding three years or by a fine not
days, and in default thereof the entry made in the primary entry exceeding two thousand pesos, or by both, in the discretion of
book will ipso facto become null and void. The government, Whoever fraudulently procures, or assists in fraudulently pro- the court.9
however, is exempted from paying the fees in advance in order to curing or is privy to the fraudulent procurement of any certificate of
be entitled to entry of registration.1 title or owners duplicate certificate, or of any entry in the register or It is to be observed that while under Section 119 of Act 496
other book kept in the office of the clerk of court or of any Registry of mere failure to inform the buyer of a subsisting encumbrance on
With respect to registration of a, mortgage involving lands Deeds, or of any erasure or alteration in any entry in any set of books the prop-erty sold is deemed sufficient to commit the crime of
situated in different provinces, where it is necessary to register the or in any instrument authorized by the Land Registration Act, or fraudulent sale, under the Revised Penal Code (Article 316,
document in the Registries of Deeds in separate places, the former knowingly defrauds or is privy to defrauding any person by means of paragraph 2), however, mere non-disclosure is not enough. Thus,
practice was to collect in each instance the full registration fee on a false or fraudulent instrument, certificate, owners duplicate it was held that there must be a positive and direct statement or
the basis of the total amount or consideration of the mortgage. The certificate, statement, or affidavit affecting registered land, shall be representation by the seller that the realty he is disposing is not
apparent duplication of payments of fees, though criticized in some fined not exceeding ten thousand pesos or imprisoned not exceeding burdened with any lien. The mere passive attitude on his part in
quarters, was sustained by the court on the principle that the five years, or both, in the discretion of the court. 7 not disclosing the existence of the encumbrance on the property
separate property situated in each province legally secured the full is not sufficient to constitute fraud within the meaning of the law.
amount of the mortgage obligation due to the indivisible nature of Forgery. Stated otherwise, there must be an ex-press misrepresentation
such a contract.2 However, a deviation from the above principle has that the property is free from encumbrance. Silence as to
been made possible with the enactment of Republic Act No. 928, Whoever forges or procures to be forged or assists in forging the encumbrance does not involve a crime because the law does not
approved June 20, 1953, providing that In a mortgage affecting seal of the clerk or of any Registry of Deeds, or the name, signa-ture, penalize the person who sells encumbered realty without
properties situated in different cities or provinces, the basis of the or handwriting of any officer of the court or of the Register of Deeds, disclosing the encumbrance thereon, but one who should sell it
fees in each registry of deeds where the document is to be in case where such officer is expressly or impliedly authorized to affix free from encumbrance.10
registered shall be such amount as obtained for the properties lying his signature; or
within the jurisdiction of said registry after apportioning the total The law does not punish the mere selling of real property
amount of the mortgage in accordance with the current assessed Fraudulently stamps or procures to be stamped or assists in mortgaged. In fact, it is permissible as may be inferred from
value of such properties. stamping any document with any forged seal of the clerk or Reg-ister Article 2130 of the Civil Code which provides that a stipulation
of Deeds; or forbidding the owner from alienating the immovable mortgaged
It may be stated, in this connection, that a restraining order, shall be void. What the law punishes is the sale of a mortgaged
injunction or mandamus issued by the court may be entered in the Forges, or procures to be forged, or assists in forging the name, property under the misrepresentation that is not encumbered.
Day Book of the Registry and registered on the certificate of title af- signature, or handwriting of any person whosoever to any in-strument The gravamen of the offense is the deceitful disposition of the
fected, free of charge (P.D. 1529, Section 69). which is expressly or impliedly authorized to be signed by such person encumbered property as free from encumbrance, although such
under the provisions of the Land Registration Act; or encumbrance be not recorded.11
Likewise, all documents or contracts executed by or in favor of
the National Housing Authority are exempt from the payment of Uses an, document upon which an impression, or part of the Other remedy of aggrieved party.
registration fees, including fees for the issuance of titles, as well as impression, of any seal of the clerk or of a Registry of Deeds has been
of documentary stamp tax (P.D. 1922, May 6, 1984). forged, knowing the same to have been forged, or any document the No conviction for any act prohibited by the Land
signature to which has been forged, knowing the same to have been Registration Act shall affect any remedy which any person
85
aggrieved or injured by such act may be entitled to by law against existing law then provided would be accorded to such titles in the 113 of the Decree, until the land shall have been brought under
the person who has committed such act or against his estate. 12 hearings had under the Land Registration Act before the court. the operation of the Torrens system.

Discontinuance of pre-existing system of registration. The above rule has now been abrogated inasmuch as under the The books of registration for unregistered lands provided
provision of Section 3 of Presidential Decree No. 1529, approved June under Section 194 of the Revised Administrative Code, as
As provided in Section 124 of Act No. 496, with respect to 11, 1978, the system of registration under the Spanish Mortgage Law amended by Act No. 3344, will continue to remain in force;
lands unregistered in accordance with the provisions thereof, the has been discontinued and all lands recorded under said system which provided, that all instru-ments dealing with unregistered lands
system of registration and recording theretofore established by law are not yet covered by Torrens title shall be considered as un- shall henceforth be registered under Section 113 of Presidential
would continue and remain in force, unless modified, and the registered lands. All instruments affecting lands originally registered Decree No. 1529.
evidential weight given by existing law to titles registered as under the Spanish Mortgage Law may now be recorded under Section
oOo

86

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